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This week's relatively lifeless returns reflect the ambiguity gripping the market as investors and

Federal Reserve

officials alike find themselves stuck in a waiting game.


Dow Jones Industrial Average

ended an eight-day winning streak Wednesday as the minutes from the March FOMC meeting were released. The Fed clarified little about future policy moves and clung to its forecast for moderate growth and slowing inflation. But the central bank's rhetoric was flooded with angst about the risks to those Goldilocks-like outcomes.

Investors have followed the Fed's lead, cautiously driving stocks back up even while many expect ruin just around the corner. The disaster could be more housing market calamity and consumer weakness, a liquidity crisis and financial market meltdown, or slowing business spending, declining profits and protectionism on Capitol Hill.

"The market is quiet and moving forward even with plenty of non-believers, on lackluster volume," says Michael Driscoll, director of listed trading at Bear Stearns. "It is difficult for people to have a strong opinion right here. Investors are waiting to see the data, and to see how earnings will do."

The Dow added 0.4% on the week to close at 12,612.13, while the

S&P 500

gained 0.6% to close at 1452.85. The

Nasdaq Composite

finished the week up 0.5% to close at 2491.94. The broad NYSE Composite Index rose to an all-time high Friday at 9522.86, which gave hope to some bullish technicians that

more new highs are afoot.

The weekly gains were cemented Friday in the wake of raised earnings guidance by


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, as well as upbeat comments about sales from


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In terms of growth, the Fed says "recent developments in the subprime mortgage market suggested that downside risks relative to the expectation of moderate growth had increased." These risks included more sluggish-than-expected business spending trends in addition to housing-related woes. On inflation the Fed says, "recent readings on inflation and productivity growth, along with higher energy prices, had increased the odds that inflation would fail to moderate as expected."

Economists responded by likening the economy's path to walking on thin ice or traversing a tightrope. Under the ice, or the tightrope lies either recession swamp or the quicksand of inflation.

Several economists revised down their outlook for economic growth for the first quarter this week on the heels of the continuing weakness in housing; lackluster business spending; and a less-robust-than expected ISM services report.

The International Monetary Fund and the Blue Chip Economic panel of forecasters both cut their U.S. forecasts this week. The IMF cut the U.S. 2007 forecast to 2.2% from 2.9%, while the Blue Chip panel cut its forecast to 2.3% for the year, down from its 2.5% estimate in March.

Both site capital spending weakness and housing as key factors. Goldman Sachs economic research team writes that its 2% GDP estimate seems a "mite high," but adds that reports on trade, inventories and retail sales could swing their estimate sharply in either direction.

But, once again, gloom and doom could turn into bullish revisions, and the market saw seeds of such a rethink this week. Last Friday's strong March jobs report was still fresh in traders' minds as the market saw the consumer may once again be the hero of U.S. growth. Retail sales were a big contributor to fourth quarter GDP, and it may once again rescue estimates this time around.

Same-store sales figures for March were more robust than expected. According to Thomson Financial, 79% of retailers beat analyst expectations. Last quarter, consumers surprised the market by shopping more than anyone expected, which drove up economist GDP estimates to the near 3% level. In the end, the government reported growth in the fourth quarter at 2.5%. The Census Bureau reports on Monday the aggregate retail sales for March.

The trade deficit for February was smaller-than expected, but the boost from exports is fading. Exports fell 2.2% in February, after six months of record highs. Indeed, real net exports are likely to be a 0.5% drag on GDP growth, writes Gary Bigg, economist at Banc of America Securities.

While stocks focused on growth, the bond market continued to shift its attention to the inflation question this week. As the fed funds futures market ratcheted down the odds of a rate cut, yields on longer-maturity bonds are rising. The yield on the 10-year note rose to 4.76% from 4.67% last Friday. The 30-year bond yielded 4.92% Friday, up from 4.87% last week.

Retail stocks didn't fare as well as they might have given the strong sales reports. Companies warned that March's strength might have been due to Easter and Spring break shopping, and


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warned that its first quarter-earnings guidance may be hard to meet. The S&P Retail Index fell 0.6% on the week.

Cyclical and economically sensitive stocks still drove the market this week, regardless of the uncertainty. The Dow Jones Transportation Average finished up 2.4%, while Morgan Stanley's Cyclical Index gained 0.8%.

The drifting, low volume feel to trading sessions could be partially due to the lack of a major M&A deal. Deal chatter was just that -- chatter. Rumors were squashed about takeovers for

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Gold Fields

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, but Friday brought a new deal to discuss. On Friday,

The New York Times

reported that


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, or Sallie Mae is in talks with private equity firms. Sallie Mae jumped 14.8% Friday.

Earnings were a positive as economic bellwethers


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reported a healthy first quarter.

If investors were just biding time this week, next week will bring more economic data and earnings to chew on. Retail sales come out Monday, along with reports in the week on March housing activity, business inventories, two regional manufacturing reports, and the consumer price index.

In keeping with TSC's editorial policy, Rappaport doesn't own or short individual stocks. She also doesn't invest in hedge funds or other private investment partnerships. She appreciates your feedback. Click


to send her an email.