CONFIDENCE
Bouncing back
As Americans hear glowing reports that there was no recession after all, or that it was too mild to notice, their ears perk up. After all, it was only weeks ago that the news was filled with gloom.
Why, they ask, did confidence in the future sink, along with business activity and spending, if there never was anything to fear?
Such questions will be on many minds Tuesday, when the Conference Board reports its consumer confidence survey results for March.
Economist Lynn Reaser is looking for the index to show a significant bounce, to a reading of 98 or 99 from the 94.1 a month earlier.
“Americans are more upbeat. They keep hearing that an economic recovery is under way and they like the fact that the war on terrorism seems to be going well,” said Reaser, of Banc of America Capital Management in St. Louis.
A slump in confidence in February, she said, was caused by Americans fretting over the demise of Enron Corp., which dragged the stock market lower and created anxiety about retirement investments.
But with the onset of spring, Reaser said, “Americans have decided that Enron was the exception, not the rule, for Corporate America. Their mood has brightened appreciably.”
HOME SALES
Low on fuel?
Two tests of the construction and real estate markets, February existing-home sales on Monday and the month’s new-home sales Wednesday, will offer clues about whether the lengthy boom in home building is running low on fuel.
A sharp rise in Treasury bond yields has put a squeeze on home refinancing in the last few months. After an initial rush to lock in rates, analysts say, the upward pressure on rates is threatening to put a damper on real estate activity.
But who would have said that last week, when February housing starts soared? Construction of single-family homes zoomed up 7.4 percent from a month earlier, to the highest level in nearly 25 years.
Helping to boost the housing market, analysts said, is a widespread belief that property ownership will outperform Wall Street over the medium term.
GDP
Steady growth
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Don’t be surprised if Friday’s revision of fourth quarter gross domestic product adds to pressures for the Federal Reserve to boost short-term interest rates. Only a small revision in the GDP number is expected from the 1.4 percent growth rate reported earlier.
But with short-term rates at a 40-year low, any fresh signs that the economy has shaken off recession and is building momentum make the central bank seem out of step.
Late last week, oil prices rose to six-month highs, while a widely followed index of commodity prices soared to a new eight-month peak.
Meanwhile, one major Wall Street firm boosted its estimate of growth for the first quarter to 5 percent, from a previous estimate of 2 1/2 percent.
Such rapid expansion would hardly justify the current highly expansionary monetary policy, which was based on near-obsessive fears of recession.
Other reports due out: February orders for durable goods Tuesday, the month’s personal income and spending Friday and the monthly survey from the Chicago Association of Purchasing Management, also on Friday.
Of the group, watch the durable goods report, which is a sensitive measure of how rapidly the economy can revive.
EQUITIES
Bumps ahead
For the stock market it has been a relatively balmy winter, with major blue chips up about 4 percent since Christmas. But a terror-afflicted autumn was much more kind to the group, which rose 22 percent ahead of the holidays.
At this point, worries about interest rates and potentially sour first-quarter corporate earnings are causing some investors to take a cautious stance. Bottom-line reports will begin rolling out in about two weeks.
“The road back for profits will be a long and potentially bumpy one,” said economist Geoffrey Somes of Fleet Boston Financial. That, he added, “could place a drag on business investment for some time.”
Meanwhile, this will be a shortened week on Wall Street. Markets will be closed on Good Friday.