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Even with a

Federal Reserve

policy meeting looming and crude oil trading back near $100 a barrel, Wall Street's focus this week will undoubtedly fall once again on the troubled financial sector.

Despite the weight of falling financials, the major averages managed to close out last week with gains. The

Dow Jones Industrial Average

rose 201 points, or 1.8%, the

S&P 500

tacked on 9 points, or 0.7%, and the

Nasdaq Composite

added 6 points, or 0.3%. To some analysts, the coming week will have a more grim tone than the last.

Lehman Brothers



Washington Mutual


have been the latest source of woe for the market. Over the last five sessions, shares of Lehman plummeted 77% after the investment bank announced the biggest quarterly loss in its history amid billions of dollars in writedowns.

Lehman CEO Richard Fuld reportedly has been searching for a buyer for the investment bank, with many traders expecting an announcement to come before Asian markets open the trading week. The Federal Reserve Bank of New York late Friday held an emergency meeting of top government officials and Wall Street chieftains to discuss Lehman's fate, according to

The Wall Street Journal

, and various reports have

Bank of America





as possibly playing the role of white knight for Lehman.

WaMu, meanwhile, tumbled 36%. Moody's Investors Service downgraded the bank's holding company to below investment grade, saying it has limited financial flexibility and will have difficulty replenishing capital.

Rumors swirled Friday afternoon that

JPMorgan Chase


was interested in acquiring WaMu, which buoyed shares after what had been a difficult week. With no resolution reached yet, the drama is expected to stretch into the coming sessions.

"The troubles of Lehman and WaMu are going to continue to dominate," says Robert Pavlik, chief investment officer with Oaktree Asset Management. He adds that investors' attention could start to turn toward



, which has also faced numerous questions in the past few months.

Paul Nolte, director of investments with Hinsdale Associates, expects that much of the economic data for the coming week will be buried by more headlines on the financial companies. "It may be very much like this past week. It very well could be that whatever economic data comes out gets shifted to the back burner," he says.

Among the economic releases set to hit the wires is the Federal Open Market Committee's latest decision on interest rates. While most observers expect the central bank to keep rates unchanged at 2%, sentiment is growing that the Fed may actually cut rates.

Tony Crescenzi, chief bond market strategist at Miller Tabak and a contributor to's

sister site,

, says the market is priced for 14% odds of a cut, up from 2% earlier last week.

"The belief is that the Fed has enough evidence in front of them to cut rates again as the sweetener to get any deal for Lehman out of the way," says Art Hogan, chief market analyst with Jefferies. "The fed funds futures are pricing in the possibility of the Fed doing an emergency rate cut as a slight nod to whoever it is that takes over Lehman."

The Fed is also set to report industrial production and capacity utilization data for August on Monday, with analysts expecting production to fall 0.3% and capacity utilization to slip to 79.6% from 79.9%.

"I wouldn't be surprised, as the dollar strengthens, to see those numbers begin to trend lower," says Pavlik. "But so far, these numbers have been OK as manufacturing has been doing well."

More data will come Tuesday in the form of the consumer price index. The headline number is expected to show no change, while the core CPI number -- an important measure of inflation -- should rise 0.2%. On Friday, the Labor Department said the producer price index fell 0.9% in August, more than the expectation of 0.5% decline, while the core PPI matched estimates with a 0.2% increase.

On Wednesday, housing starts and building permits for August will be released. All of the data, though, is surrounded by a report on the New York Empire State Index due Monday and the Philadelphia Fed index set for release on Friday.

Financial companies will also dominate the earnings calendar.

Morgan Stanley


is due to report results Wednesday, but

Goldman Sachs'


quarterly report, due Tuesday, is generating more interest from industry observers.

"This is where the Goldman model is going to be tested," says Nolte. "Goldman has been the anomaly, seen as smarter than most in this weak environment. But as this environment persists, it will continue to test Goldman."

Best Buy



Adobe Systems






General Mills








are also due to report quarterly results next week.

Lost in all of the financial company headlines is the price of crude oil, which traded below $100 a barrel briefly on Friday. That came as Hurricane Ike churned in the Gulf of Mexico as a large category 2 storm approaching the Texas coast.

"Are we really are more concerned about a global economic slowdown than we are about the possible damage of a hurricane?" asks Hogan. "Apparently we are."