Five-Day Forecast: Is Deere's Run Done?

Before we look at a pair of companies reporting earnings in the coming week, here are some quick thoughts on two economic reports of interest.

On Monday afternoon, May 7, we'll get the report on the annual April budget surplus. Tax receipts likely filled the government's coffers by $155 billion to $160 billion, down from $177 billion in April 2007. This would continue a recent trend, where the monthly federal budget receipts are worse than a year earlier.

And that should be a real concern. The budget deficit exceeded $400 billion in 2004. The deficit started to shrink to around $200 billion recently, but it looks like we're now heading back up toward the $300 billion mark.

Unfortunately, President Bush's potential successors don't exactly look like budget hawks. Sen. John McCain is calling for further tax cuts and increased military spending. To offset those budget pressures, he proposes slashing the rest of government by a third. Who believes that will really happen?

Back in the 1990s, the Clinton administration had a fairly strong track record of cutting deficits, so there's reason to hope that senators Obama or Clinton would be more inclined to force us to live within our means. A boost in the top tax rate appears very likely if either is elected, although it's unclear if either is prepared to tackle Washington's annual pork-fest. The only hope for any of these candidates is a stunning rebound in economic growth that lifts all boats. But that's not a plan, it's a wish.

Watch Those Inventories

Just as signs are emerging that the financial crisis may have peaked, investors need to watch the industrial sector. The recent slowdown of economic growth might have led to a buildup of unsold goods in stores and warehouses. So you'll want to keep a close eye on the business inventories report, which is slated for release on Tuesday, May 13.

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David Sterman has been an equity analyst and financial journalist for 15 years, most recently serving as Director of Research at Jesup & Lamont Securities.