Gloomsayers who foresee global chaos continue to watch for a deluge of cheap Asian goods to rain down on America’s shores, overwhelming the domestic economy and washing away corporate profits. But when skeptics press for a timetable, the problem is always six months away. In the meantime, feared barricades to the global movement of goods are failing to materialize. Watch for Thursday’s report on the December trade deficit to offer clues about whether the Asian storm has begun to slam this side of the Pacific. Chicago economist John Silvia sees the shortfall for the month widening to $9.2 billion from $8.0 billion in November. “The trade deficit is creeping up, but it’s nothing like the $11 billion or $12 billion a month we had earlier,” said Silvia, chief economist for Kemper Funds. “There is some slackening in orders, but exports continue to be stronger than expected.” Silvia says there is reason for caution, “because some negative effects on interest rates and the dollar undoubtedly will occur in the second half of this year.”
HOUSING
A SOLID FOUNDATION
A slight downtick last month in new-home sales, coupled with modest waning of consumer confidence, is prompting some analysts to fret that construction is about to slow. But economist Sung Won Sohn sees no signs of it yet. He believes January housing starts, to be reported Wednesday, will tick up a fraction of 1 percent, to an annual rate of 1.52 million units. “January was a record month for mortgage closings, and refinancing is sizzling,” said Sohn of Norwest Corp. in Minneapolis. “Builders report that although traffic is slowing, sales trends are pointing up.” Sohn says there is a time lag of four or more months before any slowdown in housing can occur, “so I would expect housing to remain solid, at least through late spring.” Also Wednesday is the report on the January producer price index, which measures wholesale inflation.
PRESIDENTS’ DAY
LIGHT ACTIVITY
Stock, bond, commodity, futures and options markets, government offices, banks and a few businesses are closed Monday in observance of the Presidents’ Day holiday. The regular weekly auction of short-term Treasury bills will take place Tuesday.
STOCK MARKET
THINKING SMALL
Memories are short in the stock market, so it is easy to overlook that the Dow Jones industrial average finished January with no gain. Such a ho-hum showing is considered an unhappy portent for the rest of the year. It also suggests another price correction for blue chips may not be far off, says money manager James Oberweis Jr. But Oberweis, of Oberweis Capital Management, North Aurora, says the outlook is brighter for small-capitalization stocks, which have been lagging. He views them as extremely undervalued. Investors, he says, “shouldn’t worry that small caps will become overvalued anytime soon, because they still have a long way to go to catch up to blue chips.”
