1. Seeking magic number to spark turnaround
Topping the agenda: interest rates. After last week’s unexpected 0.75 percent cut in the Federal Reserve’s overnight target, to 3.5 percent, investors are betting on another half-point reduction when policymakers finish a meeting on Wednesday. Chicago economist William Hummer says the central bank will notch its target lower, to a flat 3 percent, “which could serve as a magic number.” If the Fed fails to act, says Hummer of Wayne Hummer Investments, “policymakers could face a backlash. We aren’t fully out of the woods.”
2. New-home sales report to show 10-month surplus
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Don’t look for signs of a revival in Monday’s report of December new-home sales. The real estate market has about a 10-month supply of single-family homes available, says economist Ian Shepherdson of High Frequency Economics in Valhalla, N.Y., who says “prices will keep falling.”
3. Growth anemic in the 4th quarter for GDP
Don’t be surprised if Wednesday’s report on fourth-quarter gross domestic product shows growth dropping to a measly rate of 1.3 percent, down from a robust 4.9 percent three months earlier. That’s the prediction of economist Scott Anderson at Wells Fargo & Co. in Minneapolis. Although he is in the camp that says we will avoid a recession, Anderson says similar anemic expansion will continue over the next six months.
4. Java wars could mean less Starbucks stores
Struggling coffee retailer Starbucks, which is experimenting with sales of a small cup of java for $1 as it fights off McDonald’s, will announce earnings Wednesday. Starbucks is expected to list store closures. The world’s largest chain of coffee houses has seen its stock dive 50 percent in the last year.
5. Joblessness will hold flat at 5% for January
Chicago economist Robert Dederick says Friday’s January employment report will show a modest gain of about 50,000 new jobs, with joblessness holding flat at 5 percent. “The economy is keeping its head above water, although the pace has slowed since the turn of the year,” said Dederick, of RGD Economics. He said Friday’s number will represent “a moment of truth.”