Updated from Saturday, Feb. 7
Despite the promise of more dreary economic reports next week, Wall Street is focused on government plans to shore up the banking system and launch a giant stimulus plan to kick the economy back into gear.
was expected on Monday to unveil a finalized plan to restructure the $700 billion bailout program for the financial services industry, but reports say Geithner will now make an announcement on Tuesday. In addition, Friday's
report showing that employers slashed 598,000 jobs in January, and that the unemployment rate rose to 7.6%, put added pressure on Congress to finalize a $935 billion economic-stimulus package intended to help the U.S. job market.
There has been political wrangling over the stimulus plan, which has ballooned in size and includes a very wide variety of programs. But late Friday, key senators and the White House reached a
on a key part of the plan, a development that should pave the way for Senate passage.
President Barack Obama on Friday said it was "inexcusable and irresponsible" for Congress to delay its passage any further in light of the deteriorating job market.
Next week, the economic data calendar is fairly light, with wholesale inventories set to be released on Tuesday, the U.S. trade balance on Wednesday, retail sales and business inventories on Thursday and a consumer-sentiment indicator on Friday. The market has also been scrutinizing the initial jobless claims report each week, which will be released on Thursday as well. Few predict any significantly good news from those reports, with retail sales expected to decline, consumers still fairly negative, and jobless claims to remain elevated.
Bill Stone, chief investment strategist of
PNC Financial Services Group's
wealth-management business, notes that the market was up Friday, despite a "pretty ugly" employment report showing the biggest job cuts since 1974 and highest unemployment rate in more than 16 years. Stone says that's because Wall Street already expects a miserable reflection of a contracting economy, and is hoping the government can pull through with a plan to prevent an even steeper recession.
"Everybody's waiting for Monday for Geithner to lay out the financial rescue package," says Stone, "because it's hard to get the economy going again unless the banking system is functioning."
A vote on the
is also likely to occur sometime next week. The package has been criticized for a lack of focus on targeted projects that can start hiring people quickly, though Stone says whatever is passed will still have a positive impact on the markets.
"Nothing passed by a political body is going to be perfect," says Stone. "It's just the nature of the beast. But you hope that, on balance, the things they put in there are good."
Bank stocks like
Bank of America
rallied Friday, presumably on hopes for the restructured bailout package. However, Frank Ingarra, co-manager of the Hennessy Focus 30 Fund believes short-covering helped fuel the rally as well.
Ingarra says some earnings reports next week will provide clues about the health of the economy and how companies are responding. Soft-drink makers
will report Thursday and Friday, respectively. Teen retailer
Abercrombie & Fitch
will also issue its earnings announcement at the end of the week.
"Those reports are pretty good barometers of the consumer," Ingarra says, referring to Coke and Pepsi. But, he adds, "I can't imagine any of these data items are going to be good."
With the effects of the economic slowdown now moving past the financial sector and into the real economy, companies across the board have been reporting weak results, announcing layoffs and issuing predictions of more pain ahead. Last week,
all provided gloomy earnings news due to slumping demand, as did
Despite the overall market funk, with the
Dow Jones Industrial Average
languishing between 7,000 and 9,000 points, Ingarra's fund is still fully invested in equities. He notes that the so-called "Dogs of the Dow" are now yielding over 4%, which is far better than even the 30-year Treasury bonds that investors have flocked to for safety.
"The market usually turns six months before good economic data comes out, and I don't think we're anywhere near ready to turn," he warns. "But there's no other place to hide ... and I'd rather go into something that has more upside when the market turns around."