Caution Prevails on Wall Street
With the month of May already half-way through, the general attitude on Wall Street appears to be one of caution, which analysts believe will continue into the coming week. Although stocks were doing well around two weeks ago, hitting levels that had not been seen in almost three years, investors are reportedly wary of the possible negative impact that the conclusion of the Federal Reserve’s bond buying program, commonly referred to as QE2, at the end of June will have on markets. Moreover, falling home prices have resulted in growing number of homeowners having mortgages that are higher than the value of their homes, with some choosing to use their limited income to pay for utilities and daily necessities, and defaulting on their mortgages. Homeowners who have received short-term assistance with modified mortgages are facing the prospect of having to return to the original mortgage terms, paying more for a house than it is worth. President Barack Obama has been reported as saying that he wanted mortgage modifications for extended terms, as well as principal reductions; however this has not been received favorably by banking groups and it remains to be seen if homeowners will receive sufficient assistance to prevent foreclosures.
In the week ahead on Wall Street, investors will have the opportunity to peruse minutes of the Federal Reserve’s April meeting and draw their own conclusions as to how the central bankers view a number of issues that will impact the economy moving forward. Investors will also no doubt be keeping a close eye on the status of the dollar, which many fear may be losing ground as the international trade currency of choice. With all these concerns, investors have been shifting focus to areas of the market considered to be more defensive, such as utilities, health care and consumer discretionary stock.
Monday sees some major retailers release their earnings reports, including J.C. Penney (NYSE: JCP) and Lowe’s (NYSE: LOW). The National Association of Homebuilders will be presenting May’s housing market index, which is expected to remain unmoved at 16. Reports on April’s housing starts and building permits are due on Tuesday morning. Earnings from Wal-Mart (NYSE: WMT), Home Depot (NYSE: HD), and Dell (NASDAQ: DELL) are also due on Tuesday. The minutes of the Federal Reserve’s April meeting are due on Wednesday. Target (NYSE: TGT) and Hewlett-Packard (NYSE: HPQ). Statistics on claims for jobless benefits are due on Thursday, as well as the Philadelphia Fed’s index for May and the National Association of Realtors existing home sales for April. Sears Holdings (NASDAQ: SHLD) will report results on Thursday. Friday sees Chinese e-commerce company Dangdang (NYSE: DANG) report its first-quarter results following its entry into US markets in December.