America’s booming economy, in the midst of the country’s longest peacetime expansion, looks a bit less rosy when viewed from overseas. The Japanese, in particular, take a dim view, seeing a glass that is only half full. They fear that America’s interminable trade gap, much of it caused by Tokyo, will undermine the value of overblown U.S. assets. Such concerns helped drag the dollar last week to a 28-month low against the Japanese yen. Further reconsideration occurs Thursday, with the November trade deficit. Chicago economist Samuel Kahan looks for the shortfall to worsen to $14.5 billion, from $14.2 billion a month earlier. “If the trade deficit were to widen appreciably, it could slow the economy. It also could create a political problem,” stirring demands for protectionism, said Kahan, of A.S.K. Financial Research. “So far, the dollar retains its strength, because the U.S. is seen as a safe haven.” For now, what happens in Brazil is more crucial to the dollar’s outlook, Kahan said, than the size of America’s trade deficit.
HOUSING
A YEAR TO BUILD ON
“As perfect a year for home construction as anyone can remember” describes what will be reflected in Wednesday’s report on December housing starts. That’s the prediction of economist Sung Won Sohn, who says “the planets came together in 1998 for the housing industry.” Sohn, of Wells Fargo & Co. in Minneapolis, said the December report will show a rise to an annual rate of 1.68 million units, from 1.65 million a month earlier. “But good things don’t last forever,” Sohn said, “so the question is, what can go wrong?” He said the possibility of a setback for Wall Street and pressures from a less-than-healthy global economy may cause new construction to slow in the second half of this year.
PROFIT GROWTH
SO-SO FOR ’99?
A torrent of corporate profits reports continues this week, with concerns still rampant that 1999 will show only so-so earnings growth. Heading the parade in the next few days are the major automakers, with investors girding for bad news from Ford Motor Co. The company said last week it will be forced to trim $630 million from its after-tax fourth-quarter earnings, or 51 cents a diluted share, in large part because of an early retirement program that reduced its workforce by nearly 9,000.
STOCK MARKET
BREATHING ROOM
It’s a holiday Monday for stock, bond, futures and options markets, as well as for schools, banks and government offices. Not many businesses, however, give employees the day off with pay. Wall Street can use a day off after last week’s bumpy journey, which saw stocks take a wild dip, only to swing back. Chicago investment manager Marshall Front said there is no reason to overreact to such volatility, because “there always is the possibility of a 5 to 10 percent correction, whether the market’s disappointments are real or illusory.” Front, of Trees Front Associates Inc., still looks for the Dow Jones industrial average to finish this year at 10,150.
