| NEW YORK, April 26
NEW YORK, April 26 With signs of a slower
economy mounting, the near-term outlook for U.S. stocks isn't
rosy, but investors may find comfort next week from the world's
major central banks.
The Federal Reserve will meet on Tuesday and Wednesday, with
the report of weaker-than-expected, first-quarter growth could
reinforce expectations the Fed will keep purchasing bonds at a
pace of $85 billion a month.
Low interest rates and ample liquidity provided by the Fed
and other central banks have buoyed global equity markets
because low borrowing costs for businesses and consumers lead to
richer corporate profits. Major U.S. stock indexes hit record
highs earlier this month.
"As long as it looks like central banks are on your side and
on investors' side as far as providing more liquidity, that's
going to help improve sentiment," said Brian Jacobsen, chief
portfolio strategist at Wells Fargo Funds Management in
Menomonee Falls, Wisconsin.
"I don't think (Fed officials) have got enough data since
the last meeting to really justify changing policy. I really
don't think they're going to look at slowing the pace of
purchases until probably September."
A strong commitment from the Fed to continue its stimulative
policy, coupled with corporate earnings that have mostly
exceeded lowered forecasts, could help Wall Street extend a
rally despite signs that the U.S. economic recovery is losing
Even though the market ended flat on Friday, its performance
for the week was positive. The Standard & Poor's 500 rose 1.7
percent, the Dow Jones Industrial Average was up 1.1 percent and
Nasdaq Composite Index rose 2.3 percent
The economy expanded at a 2.5 percent annual rate in the
first quarter, the Commerce Department said on Friday, short of
expectations of 3.0 percent and setting a cautious tone.
A heavy slate of key economic indicators will be released
next week, including personal income and spending, the Institute
for Supply Management's manufacturing and services activity
indexes, pending home sales, the Chicago purchasing managers'
index and consumer confidence from the Conference Board.
The highlight of the week will come on Friday when the
Labor Department releases its employment report for April.
Economists polled by Reuters are looking for job growth of
150,000, up from 88,000 in March. The unemployment rate is
likely to remain unchanged at 7.6 percent.
"Today's (GDP) data suggests maybe the momentum is much
weaker that what was priced in," said John Praveen, chief
investment strategist at Prudential International Investments
Advisers in Newark, New Jersey.
"We have had a very strong rally, so people are looking for
any trigger for profit-taking," he said. Praveen said the market
could see a 5 percent pullback in the months ahead should
upcoming data prove weaker than expected.
Stocks have had a wild run over the past week after hackers
attacked the website of stock broker Charles Schwab Corp
and a false report on the Associated Press's Twitter
account about explosions at the White House sent the market into
a brief tailspin.
On Thursday, a software glitch shut down the Chicago Board
Options Exchange for half the day, preventing trading in options
on two of the stock market's most closely watched indexes and
delivering the latest blow to confidence in the way U.S.
financial markets operate.
The European Central Bank meets on Thursday and investors
will watch to see if it delivers an interest-rate cut as the
euro zone economy deteriorates further. Further monetary easing
would encourage investors to buy riskier assets and boost
"The market has been rallying on the fact the ECB might
actually start to do something; if the U.S. market reacts in the
same way, that might get the market rallying," said John
Canally, investment strategist and economist for LPL Financial
With earnings reporting now half over, investors will look
to see if companies can continue to exceed profit estimates
despite lackluster revenue.
According to Thomson Reuters data, of the 251 companies in
the S&P 500 that have reported earnings for the first quarter,
68.5 percent have beaten analysts' expectations, above the 63
percent average since 1994.
However, only 42.3 percent have topped analysts' revenue
forecasts, well below the 62 percent average since 2002 and the
52 percent rate for the last four quarters.
Analysts now see earnings growth of 3.8 percent this
quarter, up from expectations of 1.5 percent on April 1.
Next week Dow components reporting results will be Pfizer
and Merck. Other companies scheduled to report
include Loews Corp, Aetna Inc, Chesapeake Energy
, Visa Inc, Viacom Inc and Kraft Foods
David Joy, chief market strategist at Ameriprise Financial,
based in Boston where he helps oversee about $700 billion in
assets, said the lackluster figures suggest the second quarter
may not be as robust as hoped.
"Right now, markets are going through an adjustment process,
trying to figure out just how robust the economy is here and
overseas as well," Joy said. "You have investors sort of biding
their time. They are invested, but not with complete