Valentine's Day is lodged firmly in the middle of the coming week, one day after Federal Reserve Chairman Alan Greenspan gives his Humphrey-Hawkins testimony and one day before a rather big day of earnings releases.
So, will the coming week be a heartbreaking massacre? Or should you bust out the slow jams for some sweet loving from the tape?
Hold off on the Kevlar and Barry White, people. In the wake of a pair of 50-basis-point cuts to the
fed funds rate, markets have traded on pretty moderate volume, without a lot of clear leadership and direction. That is, until Friday, when both the
Dow Jones Industrial Average and the
Nasdaq Composite Index stumbled as a warning from
and possible bad news from
caught up with stocks.
Oh, yeah. And
Lucent Technologies is
All eyes are on Tuesday, when Greenspan delivers his Humphrey-Hawkins testimony to Congress. This is the twice-yearly chat with your elected officials about the state of the American economy. The setup is pretty standard, with Greenspan giving a prepared speech, followed by a question-and-answer period.
Some years, this testimony is pretty exciting. Last year, during the Q&A, Greenie hyped rising productivity and said it was understandable that stock prices rise accordingly. Markets followed suit, driving the Comp up 168 points, or nearly 12%, to 4550. A lot of records were broken that day.
Well, this year's situation is a little hairier. The Fed's cutting rates, not hiking them. The economy is slowing down and, well, the Comp hasn't seen 3000 in a while, let alone 4500.
The Fed, apparently not presently concerned with inflation, wants to do whatever it takes to ensure that 4% growth can continue. Jim Glassman,
senior market economist, said that the Fed boss would be more explicitly addressing monetary policy and the economy than in earlier congressional chats,
like the one from a couple weeks back, and would show he's willing to do whatever it takes to keep growth around 4%.
"There is no inflation problem -- so that gives him all the latitude in the world," Glassman said. "He's going to say, 'We're there.' The economy is slowing but he's optimistic. He wants to sound confident, because of consumer confidence levels. He's got a delicate job."
Other economists agree.
"We expect a reiteration of the
FOMC directive to make rapid and forceful movements," said Joe Abate, economist with
. "He'll also make some comments on taxation."
Chances are Greenspan's comments will echo things he's already said -- that the economy is slowing, that the Fed is watching the data closely and is willing to cut rates in order to stave off a recession.
And there'll be a whole slate of data emerging this week, with
data hitting on Tuesday and the
Producer Price Index
, a measure of inflation, hitting Friday. But, Glassman said he's got his eyes on consumer sentiment levels and jobless claims, since inflation is in check and the retail data will most likely repeat things seen this week when retailers released earnings.
Some people have even grumbled that the Fed would, or more accurately should, cut rates before its March
Federal Open Market Committee
"Probably not. I mean, the Fed's not going to do anything. Not unless something terrible happens. In an environment like this, where the economy is slowing, the Fed could see fit to intervene at any point. They could feel they have to do more. But barring a dramatic shift in data -- we think the Fed will cut 50 basis points at the March meeting," he said.
No Carrot! Only Stick
OK, with the economic dance card all filled up, when will these markets start moving again? With the notable exception of Friday's selloff, markets haven't been that exciting, with the Dow stuck below 11,000 and trading in the same range since Halloween 2000.
"People know that earnings are bad. The economy is stagnant. We're just figuring out what kind of recovery is happening. And what long-term themes are in place," Glassman said. "There's no carrot for the equities market."
In other words, there's no story right now. Back in 1998 and early 1999, the Web was the big story. And it was a powerful one, with everyone predicting that this new technology would revolutionize the globe and reap in
Anna Nicole Smith
-style bucks. IPOs were rushed to Wall Street, only to be shaken out a year later in 2000, when the new story was earnings. As in -- you need earnings. Now.
But now, there's no Internet to pin hopes to and the future is unclear. As a result, many traders are sitting out, waiting for a new carrot -- some incentive that things will soon improve. Next week should be more of the same. Unclear direction -- all eyes on the Fed.
It Ain't Over Yet
sang "Baby, it ain't over 'til it's over."
Coincidentally, Joseph Kalinowski, earnings guru from
First Call/Thomson Financial
, said the exact same thing about earnings season.
"I'm showing 411 companies have reported," he said, pointing out that's really 82% of all companies set to report. "Of those, 52.6% have come in above targets, 17.4% have missed. And the rest -- 30.1% -- have come in as expected. That's pretty much on target, but the unusual number is the number coming in on target. It's pretty high. But you'd expect that given all the guidance.
"Next week we'll see some of the retailers, and then we're going to pretty much wrap it up. We shouldn't see too many surprises, since we've already seen companies make downward guidance."
The day after Valentine's Day, Feb. 15, will be the biggest day for retailers. Look for the second-largest retail chain,
May Department Stores
, to report. Now, chances are you know May's -- you just don't
that you know. This company has a whole slew of chains under its belt, including
Lord & Taylor
Frank and Kaufmann's
. Analysts expect, on average, the company to make $1.59 a share in the fourth quarter.
, which announced the closing of 70 stores and warned of an earnings shortfall on Jan. 7, will give investors another glimpse into the uncertain future of office retail. Competitors
have both warned as well.
A pair of luxury retailers will report on Thursday. Catalog giant
and executive junk maker
are both set to release fourth-quarter earnings. Lately, the chi-chi, frou-frou retailers have struggled as the broad line, hum-drum superstores have gained ground. Just last week,
shelved plans to spin off its Saks Fifth Avenue division.
Outside of the retail world, expect Wall Street to watch some of the bigger tech companies quite closely. Despite the fact that a lot of guidance has already been given, including that whopper of a release from Cisco on Tuesday, traders will continue to look into the foggy future to discern a direction before it becomes completely clear.
, the world's largest producer of the equipment that makes semiconductors, will report fiscal first-quarter earnings on Tuesday. Analysts expect the company to earn 63 cents a share. Those are lowered expectations after Applied Materials, whose customers include
Advanced Micro Devices
, Lucent and
, warned about the first quarter. The company recently announced that some employees will be forced to take Fridays off. (Hooray!) Without pay. (Boo!)
Protein Design Labs
, a big-name biotechnology outfit, joins in on the Tuesday fun. Fiber-optic cable layer
and media monolith
follow on Wednesday.
And as with retail, Thursday will be another big day for technology. Dell, which was rocked by a Friday
Wall Street Journal
story that said it will cut up to 10% of its workforce, will prove the paper right or wrong when it releases earnings. Blue-chipper
, another job-cutter and earnings-warner, will also hit the Street. As will
Whew, all this and pitchers and catchers report to spring training! We'll be watching.