usa forecast for this week

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    Reuters
    RPT-Wall St Week Ahead-Economy to test stock rally
    Sunday July 27, 10:51 am ET
    By Denise Duclaux


    " (Repeating column initially transmitted late Friday)
    NEW YORK, July 27 (Reuters) - Stocks may bob and weave this
    week as investors wait for the nation's economy to catch up to
    their lofty expectations after Wall Street's romp off its March
    lows.
    "I think investors are saying we have come too far, too
    fast -- and the stock market needs or should have a breather,"
    said Hugh Johnson (News), chief investment officer at First Albany
    Corp.
    The Standard & Poor's 500 index (CBOE:^SPX - News) enjoyed a
    late-afternoon rally on Friday, which pushed it up about 25
    percent from its 2003 low hit on March 11. But the broad market
    measure has been traveling sideways in the past month.
    Much of corporate America has posted quarterly profits that
    topped analysts' expectations. But Wall Street has been betting
    on a solid earnings performance for months now.
    "Part of the run-up from March was in anticipation of
    better earnings reports -- and that has happened," said Paul
    Cherney, chief market analyst of Standard & Poor's. "Right now
    the market is in a sideways consolidation mode."
    Earnings reports will keep flooding Wall Street this week,
    but many investors are now turning their sights to the economy.
    A slew of key data on the job market, consumer confidence,
    manufacturing activity and gross domestic product will help
    investors decide just whether the market's monster rally was
    justified.
    STRONG PROFITS, HO-HUM REACTION
    Better-than-expected results from corporate America in the
    second-quarter reporting period so far have helped support
    stocks, but they have not proved strong enough to budge the
    market much higher over the past few weeks.
    Corporate scorecards will continue to rain down on Wall
    Street next week, including results from American Express Co.
    (NYSE:AXP - News), BMC Software Inc. (NYSE:BMC - News), Sprint Corp. (NYSE:FON - News), Xerox
    Corp. (NYSE:XRX - News), McDonald's Corp. (NYSE:MCD - News), Tyco International
    Ltd. (NYSE:TYC - News), Verizon Communications (NYSE:VZ - News), The Walt Disney
    Co. (NYSE:DIS - News), Exxon Mobil Corp. (NYSE:XOM - News), Halliburton Co. (NYSE:HAL - News)
    and Procter & Gamble Co. (NYSE:PG - News)
    Almost 65 percent of the S&P 500 companies have posted
    quarterly earnings, according to Thomson First Call (News - Websites). Roughly 66
    percent of the companies have beaten Wall Street estimates, 22
    percent have met expectations and just 12 percent have missed
    forecasts, the research firm said.
    "The big question that faces investors and market
    participants is: 'What is left to inspire the buying, real
    buying, persistent buying?'" Cherney said. "Unfortunately, I
    come up with a big question mark on that question, because we
    are coming into summer vacation when many desks are going to be
    empty."
    RIDE THE DATA WAVE
    Wall Street will be hit with a wave of economic data this
    week. But analysts say that investors may not be too surprised
    on the upside after a sharp rise in optimism over past weeks.
    Key economic reports include consumer confidence surveys,
    July non-farm payrolls, the Chicago Purchasing Management
    Index, a read on gross domestic product and the Institute for
    Supply Management's report on manufacturing.
    Gross domestic product is estimated to have grown in the
    second quarter at an annual rate of 1.5 percent, above a
    previous reading of 1.4 percent. The GDP report is on
    Thursday's calendar. The Chicago Purchasing Management Index,
    also expected on Thursday, is forecast at 54.0 in July, up from
    52.5 in June.
    The July employment report, due on Friday, will contain the
    week's most closely watched numbers. Economists polled by
    Reuters expect non-farm payrolls to have added 18,000 jobs in
    July, following a loss of 30,000 jobs in June. The U.S.
    unemployment rate is forecast at 6.3 percent, down from 6.4
    percent in June.
    Other forecasts worth noting in reports scheduled for
    Friday: The ISM manufacturing index is expected to rise to 51.8
    in July from 49.8 in June; a reading of 50 or above indicates
    growth. The University of Michigan consumer sentiment survey's
    final reading for July is forecast at 90.5, up from 89.7.
    Economic news will have to share some of the spotlight with
    government bonds. Prices of U.S. Treasury bonds have plummeted,
    driving the yield on the benchmark 10-year note up to near a
    seven-month high, as growing confidence that the economy is
    poised to rebound in the year's second half year prompted
    investors to ditch bonds.
    "We are seeing a pronounced weakness in the bond market
    for the last two weeks, and I think it's the very resounding
    cannon shot over the deck that things are about to change with
    respect to interest rates," said A.C. Moore, chief investment
    strategist at Dunvegan Associates.
    Rising bond yields could stall economic growth by hiking
    borrowing costs, curbing the rebound that so many stock
    investors were betting on when they sent stocks up sharply this
    spring."


 
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