Investors should see stocks snap back this week and resume their September rally as long as any comments from the Federal Reserve on inflation and the economic effects of Hurricane Katrina are relatively benign.
Also, quarterly results expected this week from companies in financial services, transportation and retail will be scrutinised for any hints the hurricane, one of the nation's worst natural disasters, has affected consumer spending.
Stocks ended down for the week, but remain on track to end the month with gains. For blue chips, ending the month in positive territory would break a string of losses in September over the last six years.
"The market is going to sort of tread water until we hear the results of the (Fed) meeting and what the Fed has to say about their decision," said David Joy, market strategist, RiverSource Investments in Minneapolis. "That's the 500-pound gorilla of events this week."
The Fed's policy-setting committee is largely expected to raise rates by a quarter percentage point to 3.75 percent when it meets next Tuesday, but its comments could indicate whether it plans to continue raising rates.
The central bank has increased rates by a quarter-point 10 times in the last 15 months to control inflation as the economy expands. Rate increases are considered negative for stocks because they increase borrowing costs for companies and consumers.
GAINS FOR THE MONTH:
Fund managers and analysts said this week that investment in stocks should stay high, even if the Fed raises rates this week, because of better value in equities than in bonds and currencies.
Also, a median forecast of 27 stock strategists in a recent Reuters poll showed the Standard & Poor's index is still on track for a third year of gains and it may rise 3 percent by the end of December.
For the week, all three major stock indexes ended lower, with the Dow Jones Industrial average down 0.3 percent, the Standard & Poor's 500 Index down 0.3 percent and the Nasdaq Composite Index down 0.7 percent. For the month, however, the Dow is up 1.5 percent, the S&P up 1.4 percent and the Nasdaq is up 0.4 percent.
JOBS AND EARNINGS:
Government reports on weekly oil inventory data on Wednesday and jobless claims on Thursday also could influence stocks, strategists said.
"Anything labour related will matter," said Waterman. Among the companies reporting earnings this week are Circuit City Stores Inc, Goldman Sachs Inc, FedEx Corp and Nike Inc.
"Anything that shows that energy is having an impact on consumer spending will hurt the market," Waterman said.
Crude oil prices on the New York Mercantile Exchange rose to a record $70.85 a barrel on August 30 in the aftermath of Katrina, which damaged oil rigs and refineries along the US Gulf Coast. Prices have since eased and were trading at $63 on Friday. Results from transportation company FedEx could be important in terms of Katrina's effects on its industry.
The Goldman results follow strong results from other financial companies this week, including Lehman Brothers Holdings. Lehman reported its quarterly profit rose a stronger- than-expected 74 percent on the back of robust stock and bond underwriting and a surging mortgage bond business. "We'll see if Goldman can keep that string going," Joy said.
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