Markets & Finance

Vital Signs: The Fed's Next Move


On deck: Federal Reserve's policy meeting, first-quarter GDP, and April data on consumer confidence, manufacturing activity, and employment

You might want to keep your seatbelt fastened during this week. The markets have a number of high-profile economic reports to digest, as they brace for the results of the Federal Reserve's policy meeting. As usual, the Fed will take center stage with a policy decision that comes at an especially crucial time. Reports are expected to show the economy continues to weaken, but some policymakers fear that more rate cuts could fuel inflation.

Given the success of the Fed's various lending facilities in boosting liquidity and calming anxiety in the credit markets, especially since the Bear Stearns (BSC) crisis, most economists are betting policymakers will cut their target rate by a quarter-percentage point, to 2%, on Wednesday, Apr. 30, while issuing a statement (due at 2:15 p.m.) that continues to emphasize the downside risks to the Fed's outlook for economic growth. Futures contracts currently rate the probability of a quarter-point move at about three-out-of-four, with a one-in-four chance for no change and no bets at all on a half-point move.

The Fed will have a good idea of what the economy looked like in the first quarter, given that the GDP data will come out on the morning of the Apr. 30 rate decision. Economists expect first-quarter economic growth to be essentially zero, perhaps either a small plus or a small minus. They expect consumer spending and business investment to post gains, but much smaller than in the fourth quarter, and they look for another very large drop in home construction. Foreign trade and inventories are expected to provide small pluses. Inventories will be of particular interest, because monthly data have suggested stockpiles may have grown faster than businesses wanted. If so, that could turn into a drag on second-quarter GDP growth, as companies cut output on order to bring inventories into better balance with sales.

This quarter promises to be much weaker than the first quarter in terms of overall GDP growth. Consumers are facing up to growing uncertainty about the outlook, soaring gas prices, and rising unemployment, even as housing shows few signs of stabilizing, and as businesses are becoming increasingly hesitant to increase their capital spending and expand their operations.

Two April soundings will provide the first broad look at how the economy began the current quarter. The Institute for Supply Management's index of manufacturing activity on Thursday, May 1 will give an indication of the extent of production cutbacks, and the Labor Dept.'s employment report on Friday, May 2 will suggest the depth and breadth of job market weakness. Economists expect some further slippage in factory activity, and they look for April payrolls to post a fourth consecutive decline and a further increase in the jobless rate.

Here's the weekly economic calendar, from Action Economics.

Top Economic Reports

Reports

Date

Time

For

Median Estimate

Last Period

Consumer Confidence

Tuesday, April 29

10:00 a.m.

April

60.0

64.5

Gross Domestic Product (Advance)

Wednesday, April 30

8:30 a.m.

Q1

0.2%

0.6%

GDP Chain Price Index

Wednesday, April 30

8:30 a.m.

Q1

3.0%

2.4%

Employment Cost Index

Wednesday, April 30

8:30 a.m.

Q1

0.8%

0.8%

Chicago Purchasing Managers Index

Wednesday, April 30

9:45 a.m.

April

48.0

48.2

Personal Income

Thursday, May 1

8:30 a.m.

March

0.4%

0.5%

Personal Consumption Expenditures

Thursday, May 1

8:30 a.m.

March

0.3%

0.1%

ISM Index (Manufacturing)

Thursday, May 1

10:00 a.m.

April

48.1

48.6

Construction Spending

Thursday, May 1

10:00 a.m.

March

-0.6%

-0.3%

Domestic Auto Sales (millions)

Thursday, May 1

afternoon

April

5.0

4.9

Domestic Light Truck Sales (millions)

Thursday, May 1

afternoon

April

6.4

6.2

Nonfarm Payrolls (thousands)

Friday, May 2

8:30 a.m.

April

-60.0

-80.0

Manufacturing Payrolls (thousands)

Friday, May 2

8:30 a.m.

April

-35.0

-48.0

Unemployment Rate

Friday, May 2

8:30 a.m.

April

5.2%

5.1%

Average Hourly Earnings

Friday, May 2

8:30 a.m.

April

0.3%

0.3%

Average Workweek (hours)

Friday, May 2

8:30 a.m.

April

33.7

33.8

Factory Orders

Friday, May 2

10:00 a.m.

March

0.4%

-1.3%

Other reports and events

Reports

Date

Time

For

Housing Vacancies

Monday, April 28

10:00 a.m.

Q1

Dallas Fed Survey

Monday, April 28

10:30 a.m.

April

Johnson Redbook Weekly Store Sales

Tuesday, April 29

8:55 a.m.

Apr. 20-26

ICSC-UBS Store Sales

Tuesday, April 29

7:45 a.m.

Apr. 20-26

S&P Case Shiller Home Price Index

Tuesday, April 29

9:00 a.m.

February

FOMC meeting (first day)

Tuesday, April 29

9:00 a.m.

Mortgage Applications

Wednesday, April 30

7:00 a.m.

Apr. 20-26

ADP Employment Data

Wednesday, April 30

8:15 a.m.

April

Initial Unemployment Claims

Thursday, May 1

8:30 a.m.

Apr. 20-26

Earnings Calendar

Company

Report Date

SYSCO

Monday, April 28

Humana

Monday, April 28

Manitowoc

Monday, April 28

HPC

Monday, April 28

Total System Services

Monday, April 28

Hartford Financial Services Group

Monday, April 28

Plum Creek Timber

Monday, April 28

Microchip Technology

Monday, April 28

WM Wrigley Jr.

Monday, April 28

Verizon Communications

Monday, April 28

Loews

Monday, April 28

Tyson Foods

Monday, April 28

Radio Shack

Monday, April 28

Questar

Monday, April 28

McGraw-Hill Cos

Tuesday, April 29

Corning

Tuesday, April 29

Waste Management

Tuesday, April 29

Archer-Daniels-Midland

Tuesday, April 29

CBS

Tuesday, April 29

Simon Property Group

Tuesday, April 29

Medco Health Solutions

Tuesday, April 29

Bemis

Tuesday, April 29

Countrywide Financial

Tuesday, April 29

Ashland

Tuesday, April 29

Burlington Northern Santa Fe

Tuesday, April 29

Lincoln National

Tuesday, April 29

ACE Ltd

Tuesday, April 29

TECO Energy

Tuesday, April 29

General Growth Properties

Tuesday, April 29

Express Scripts

Tuesday, April 29

Boston Properties

Tuesday, April 29

Embarq

Tuesday, April 29

CB Richard Ellis Group

Tuesday, April 29

Valero Energy

Tuesday, April 29

United States Steel

Tuesday, April 29

Convergys

Tuesday, April 29

Office Depot

Tuesday, April 29

Liz Claiborne

Tuesday, April 29

Pinnacle West Capital

Tuesday, April 29

Avon Products

Tuesday, April 29

Trane

Tuesday, April 29

Masco

Tuesday, April 29

Centerpoint Energy

Wednesday, April 30

Dean Foods

Wednesday, April 30

FPL Group

Wednesday, April 30

International Paper

Wednesday, April 30

National Oilwell Varco

Wednesday, April 30

Unisys

Wednesday, April 30

Constellation Energy Group

Wednesday, April 30

Time Warner

Wednesday, April 30

IAC/InterActiveCorp

Wednesday, April 30

Ingersol-Rand

Wednesday, April 30

Kraft Foods

Wednesday, April 30

Procter & Gamble

Wednesday, April 30

Southern

Wednesday, April 30

Kellogg

Wednesday, April 30

Unum

Wednesday, April 30

Allegheny Energy

Wednesday, April 30


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