For more months than anyone cares to recall, a rising tide of foreign goods has engulfed American consumers in a slow-motion battle for dollars. But now matters are coming to a head. A near-meltdown in Asian economies is stirring fears that a tsunami of ultralow-priced goods will wash ashore, drowning U.S. competitors. The November trade deficit, due out Wednesday, is likely to show the situation worsening. Chicago economist Samuel Kahan says the monthly shortfall will rise to about $11 billion, from $9.7 billion in October. “We can say with great certainty that U.S. exports to Asia are headed lower, while imports will rise,” said Kahan, of A.S.K. Financial Research. “By this summer, our situation will worsen, with the weaker exports creating some negative effect on American jobs.” Controversy over the trade bulge will get added attention in Washington, he says, ahead of this fall’s congressional elections. In the meantime, Kahan said, analysts are watching and waiting, “whistling past the graveyard.”
HOUSING STARTS
THE EL NINO EFFECT
The strength of the construction industry defies logic, in the minds of many economists, because new housing units are flying upward faster than the growth of population. A further gain is anticipated in Thursday’s report on December housing starts, says economist Tim O’Neill. “It could partly be due to El Nino, because last month’s weather was unusually warm,” said O’Neill, of Chicago’s Harris Bank and its parent, Bank of Montreal. He looks for starts for the month to rise to an annual rate of 1.55 million units from 1.53 million a month earlier. “There is a chance the number will be even stronger,” he said, “because of very high confidence among builders and lower mortgage rates.”
HONORING DR. KING
MARKETS ALSO CLOSED
Stock, bond, option and commodity markets, government offices and most banks will be closed Monday in observance of Martin Luther King Jr.’s birthday. It’s the first time that financial markets have been shuttered for the holiday. As for businesses, only a modest minority of companies give workers the day off with pay. The weekly auction of short-term Treasury debt will take place Tuesday.
WALL STREET
EXPECT A BUMPY RIDE?
A rocky start to 1998 for the stock market may well portend a path strewn with pebbles for the remainder of the year. An old maxim on Wall Street says that January’s results foreshadow the market’s direction for the next 11 months. Chicago investment manager William Hummer said the market is experiencing “extraordinary volatility, reflecting great uncertainty about corporate earnings and very difficult conditions overseas.” For the rest of 1998, Hummer, of Wayne Hummer & Co., said investors must adopt “a very patient approach, based on good, old-fashioned stock-picking.” Helping support the market, he says, is a rock-solid economy and the fact that relatively low interest rates “will hold in their current range.”
