The dollar took a shudder step last week on rumors that the Federal Reserve was dumping greenbacks to support the Japanese yen. The world, it would seem, has done a proverbial back flip. Who would think a staggering, stumbling Tokyo would need help from Uncle Sam, only a very few years after Americans heard dire predictions that Japan would rule the globe, buying up much of this country’s real estate in the process? Some analysts said last week’s meeting of the Group of Seven industrial countries may have signaled a high-water mark for the dollar. Chicago economist Samuel Kahan says the dollar may move a bit higher against the yen, “but from a long-term perspective, it probably is at a fair value.” Kahan, of A.S.K. Financial Research, says the onus is on the Japanese government to take action to reinvigorate a stalled economy. “The Japanese can’t resist doing something indefinitely,” he said. “If they are going to rescue their somewhat rickety banking system, they will need to get their economy moving.”
INTEREST RATES
LOWER STILL?
With concerns about a meltdown in Asia moderating, interest rates have held steady for months, confounding predictions that they would fall steeply. A $10 billion auction of 52-week Treasury bills Thursday will offer clues about whether the downward trend is resuming. Chicago economist Brian Wesbury says there still is plenty of room for rates to head lower. “There has been a continuing decline in inflation that is not due entirely to Asia. A greater factor is rising productivity, tied to technology,” said Wesbury, of Stephens, Kubik, Stephens & Thompson, an investment firm. “The last time inflation was this low, in the mid-1960s, a 5-year Treasury note was paying 4.83 percent. Currently, it is paying around 5.55 percent.”
EARNINGS
LOWER, PERHAPS
If corporate profits are supposed to be ratcheting ever higher, why is Intel Corp. cutting 3,000 jobs and Ameritech Corp. trimming 5,000? The answer, of course, is that profits are advancing at a very lukewarm pace, indeed. To mollify the tin gods of Wall Street, companies must sacrifice workers. A long list of first-quarter profit reports is due out this week, including Amoco Corp., UAL Corp., Inland Steel Industries, Quaker Oats Co., Sara Lee Corp. and Fort James Corp. Watch Amoco. Analysts are saying major U.S. oil companies, battered by the dramatic slide in global oil prices, could report profits that are 40 percent lower than a year ago.
STOCK MARKET
ONE BIG THUD
With corporate revenues and profits beginning to dry up, the stock market has been looking to mergers as a propellant for boosting equities above the stratosphere. Unfortunately, last week’s concrete egg laid by Cendant Corp., a creation of multiple mergers, cast doubt on that scenario. Cendant said accounting problems would trim upward of $100 million from earnings. That lopped $14 billion off the value of its stock.
