1. Trade deficit showing promise
Americans’ love-hate relationship with foreign-made goods has drawn cries of alarm, but economists see signs of hope. A weakening dollar, along with rising productivity, is giving U.S. manufactured goods a slight advantage. Another test comes Friday, with the March trade deficit. Economist Lynn Reaser expects it to show modest widening, to $59.8 billion from $58.4 billion a month earlier. She blames rising energy imports. But Reaser, of Bank of America’s investment strategies group in Boston, said “the deficit will remain well below last year’s peak. Trade will be a source of support for the economy through the rest of 2007.”
2. Fed still lying low
Members of the Federal Reserve have managed to fly beneath the radar for months, taking interest rate hikes off the table. They meet again Tuesday and Wednesday, with few expectations of any action. However, economist Scott Anderson of Wells Fargo Economics says the picture has changed slightly, because of Friday’s lukewarm employment report. Slowing payroll growth “certainly opens the door a little wider for a Fed cut, should inflation moderate further,” he said.
3. Wholesale price relief
A clearer picture of inflation will emerge Friday, with the April producer price index, which measures prices at the wholesale level. Economists at Global Insight in Lexington, Mass., see prices rising by 0.5 percent, only half as fast as in March, noting, “A respite from blistering food and energy price gains should provide relief to Fed officials.” That would mean core wholesale inflation for the month would rise 0.2 percent.
4. Laggard earnings watch
While there is a perception that the first-quarter earnings parade is slowing to the final few marchers, this week’s agenda of bottom-line reports includes nearly 600 companies. Included are such giants as Duke Energy and Disney, as well as Hewitt Associates and Sara Lee. While the lion’s share of profits until now have exceeded expectations, laggards may await. These include some major retailers, who have seen shoppers turn skittish in light of soaring gasoline prices.
5. Rumor mill on overdrive
For the stock market, news of corporate earnings is being trumped by the rumor mill, as each day seems to bring a fresh report of mega-mergers, real or imagined. Potential partners are running the gamut, but recent candidates have included Dow Jones & Co., Yahoo Inc., Reuters and other firms at the nexus between news gathering and the Internet. Valuing such assets may prove difficult, but Wall Street seems to be saying the sky is no limit.
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wsluis@tribune.com
