Stocks To Focus On Financials, Housing Data
NEW YORK (MarketWatch) -- Stocks next week will take their cues from fresh data on housing and consumption, while the fate of mortgage giants Freddie Mac and Fannie Mae, as well as the future of investment firm Lehman Brothers, will likely keep investors on their toes.
Among other factors likely to move markets will be Democratic presidential candidate Barack Obama's pick for vice president. Oil prices, which fluctuated wildly over the past week, also will stay on investors' radar screens.
But analysts say the ailing financial sector, where the fallout from the credit crisis continues to take its toll, will be on top of the agenda next week.
"Investors are going to focus on the housing numbers and the financial sector," said Paul Nolte, director of investments at Hinsdale Associates. "Oil prices are going to take a back seat."
Among economic data on the docket for next week are the Case-Shiller home price index and home sales figures for July. The consumer confidence index along with personal income and consumption figures for August will provide a snapshot on U.S. consumers.
After posting gains since mid-July, the stock market still seems still unable to get past the continued fallout of bad home loans that have led to a global credit crisis and mountains of losses for financial firms.
But stocks rallied Friday amid mounting speculation that Lehman Brothers might be the subject of an outright acquisition and that the U.S. government might bail out Fannie Mae and Freddie Mac .
The Dow Jones Industrial Average jumped 197 points, or 1.7%, to end at 11,628, with 28 of its 30 components gaining ground, led by financials stocks J.P. Morgan Chase , American Express , Citigroup and Bank of America .
Major stock indexes still ended the week lower, after falling three out of the past five sessions. Despite Friday's rally, the Dow finished the week down 0.3%, the S&P lost 0.5% and the Nasdaq Composite dropped 1.5%.
Front-month crude-oil futures gained 0.7% this week. Crude surged 5% on Thursday as tensions between the U.S. and Russia flared up. But on Friday oil slumped more than 5% to close at $114.59 a barrel, pummeled by a rising dollar.
Obama is expected to soon name his running mate. According to reports on Friday, North Carolina Sen. John Edwards' name figured on the short list. Others also believed to be on the list included Delaware Sen. Joseph Biden, Indiana Sen. Evan Bayh, Virginia Gov. Tim Kaine and Kansas Gov. Kathleen Sebelius.
Financials, Fed
Stocks' strong gains Friday were also supported by comments from Federal Reserve Chairman Ben Bernanke, who said he expected U.S. inflation to moderate this year. The comments fueled speculation that the Fed will keep interest rates low for the near future.
The Federal Open Market Committee, the Fed's rate-setting arm, will release minutes from its last meeting on Tuesday.
Shares of Lehman Brothers jumped 5% after Korea Development Bank, which is in talks with the troubled Wall Street firm, was quoted as saying that one of the options on the table is an outright acquisition. Despite the one-day rally, Lehman ended the week down 11% to $14.41.
Investors next week will also monitor the fate of mortgage giants Freddie and Fannie, whose shares have been battered.
"Financials will remain in play and the anxiety over Fannie Mae and Freddie Mac will remain in the market place," said Peter Cardillo, chief market economist at Avalon Partners.
The Wall Street Journal reported this week that Freddie executives will meet with Treasury officials, saying the two sides may explore whether the Treasury could clarify its intentions in a way that would reassure investors.
The Journal also reported Friday that Freddie executives are sounding out private-equity firms and other investors about buying new common or preferred shares, though there's reluctance frm investors amid fears the U.S. Treasury will nationalize them.
"It's still possible that the government will nationalize Fannie and Freddie," said Hinsdale's Nolte. "Nationalization will have a negative impact on the stock market as it will put tax payers on hook."
Shares of Fannie plunged 37% this week to end at $5, and shares of Freddie tumbled 66% this week to $2.81.
Economic data
Investors will closely watch the Case-Shiller home prices index, due on Monday. Last month, the index showed home prices in 20 major cities fell a record 15.8% in the past year. Prices were down 18.4% from peak levels seen two years ago.
Also, the Commerce Department will release its revised estimate of second-quarter growth Wednesday.
The Commerce Department reported last month that the U.S. GDP grew by 1.9% in the second quarter, boosted by federal stimulus checks and a big rise in net exports. Economists surveyed by MarketWatch are expecting the growth rate to be revised up to 2.7%.
The Conference Board will release its monthly consumer confidence index Tuesday. Last month the Conference Board said the index ticked up to 51.9 from June's 51.0. Analysts surveyed by MarketWatch expect the confidence index to rise to 52.9 in August.
Other data due out next week include existing-home sales on Monday, new-home sales on Tuesday, durable-goods orders on Wednesday and personal income growth on Friday.
By Moming Zhou