Investors Look Ahead With Cautious Enthusiasm

With stocks see-sawing over the past two weeks and trading volumes being light, stock market traders are no doubt looking forward to the weeks ahead as fall campaigns for Congress get underway. While the week ahead will see a range of economic reports being released, including readings on weekly jobless claims and consumer sentiment, President Obama’s speech to the nation scheduled for Wednesday night with address an issue which affects both Wall Street and Main Street – that of health care reform.

September is historically a tough month on Wall Street, with September 2008 being particularly noteworthy marked by the collapse of Lehman Brothers, the Bank of America buyout of Merrill Lynch, and the government’s takeover of mortgage giants Freddie Mac and Fannie Mae. While there have been a serious of rallies through the year, compared to this time last year the Dow Jones industrial average is down 13.5 percent, while the Nasdaq composite is just over 7 percent lower and the Standard & Poor’s 500 is down 15 percent.

Investors will have much to think about this week. Following Monday’s Labor Day holiday, the July Consumer Credit report from the Federal Reserve is expected on Tuesday afternoon, with analysts predicting that it will have fallen for the sixth month in a row as consumers and companies continue to refrain from borrowing. Wednesday sees the release of weekly crude oil inventories by the Energy Information Administration, with the Fed’s beige book – tracking the economy of 12 US districts – going public in the afternoon. Thursday brings the Commerce Department’s report on the trade gap for July, which is expected to remain at $27 billion, as well as the jobless and continuous claims reports from the Labor Department and RealtyTrac’s monthly foreclosure report. The University of Michigan will release their initial reading on consumer sentiment at the start of trading on Friday, with the Commerce Department’s July report on wholesale inventories expected to confirm a drop in wholesale inventories for the 11th consecutive month.

Following the meeting of finance ministers from the G-20 nations in London on Saturday, it was agreed that governments will continue to implement what they are referring to as “necessary support measures” until it is clear that economic recovery was on track. One of the issues that was addressed, and that has been a sore point for many tax-paying citizens, is the need for global standards and stringent rules on banking bonuses. Despite major economies, such as France, Germany and Japan, announcing that they have emerged from recession, British Prime Minister Gordon Brown has emphasized the need to continue with the fiscal plans and stimulus packages that countries had put in place through to the end of this year and into 2010, and has been reported as saying that “to decide now that it is time to start withdrawing and reversing the exceptional measure we have taken would, in my judgment, be a serious mistake.” A full summit of G-20 leaders will take place in Pittsburgh later this month.