Fed panel to meet; retail data due

After another record-setting week on Wall Street, investors are wondering whether stocks are due for a fall or are headed even higher. This week’s words from the Federal Reserve and data on retail sales could provide some clues.

Recently, it has seemed as if nothing can derail the stock market’s climb. Economic reports last week were mixed, but institutional investors remained enthusiastic thanks to soaring takeover activity.

News Corp.’s bid for Dow Jones & Co. reinvigorated the stock market Tuesday after a morning of mixed economic news, and on Friday, reports that Microsoft Corp. might be considering a purchase of Yahoo Inc. nudged stocks higher despite lackluster job data.

Overall, economic data have shown slow and steady growth, alleviating investors’ fears about recession. Still, worries linger about stagflation -- slowing growth amid soaring prices -- and what the Federal Reserve would do about it.

On Wednesday, the central bank’s Federal Open Market Committee meets to decide whether to keep interest rates steady.

Everyone expects the Fed to stand pat, as it has done since last summer, but investors, hoping for a rate cut by the end of the year to boost spending, will parse the Fed’s statement for indications about future moves.

To get another hint about where interest rates may be headed, investors on Friday will watch for the producer price index, a measure of inflation at the wholesale level.

The market predicts the Labor Department’s report will show that the index rose 0.7% in April, less than the 1% rise in March, according to Friday’s median estimate of economists surveyed by Thomson Financial.

The core index, which strips out energy and food prices, is expected to show a 0.2% increase for April, up from a flat reading in March.

Investors will be looking at a cascade of retail reports to get some insight into consumer spending. On Thursday, the major stores will release their sales results for April.

And Friday, investors will get the Commerce Department’s retail sales report. Economists estimate a 0.4% rise in March retail sales, the same as in February.

Last week, the Standard & Poor’s 500 index surpassed 1,500 for the first time in more than six years, bringing the index closer to its record close of 1,527.46 reached in March 2000.

Meanwhile, the Dow Jones industrial average has been climbing further into uncharted terrain; the blue-chip index broke through 13,200 last week and on Friday hit its 19th record close this year.

The Dow rose 1.1% last week, the S&P; 500 advanced 0.8% and the Nasdaq composite index gained 0.6%.

The Federal Reserve reports today on consumer credit in March. The market is expecting an increase of $5 billion, up from $2.9 billion in February, according to the median estimate of economists surveyed by Thomson Financial.

On Tuesday, the market is expecting the Commerce Department to report that wholesale inventories in March rose 0.3%, a slimmer rise than the 0.5% increase in February.

The Commerce Department on Thursday reports on the trade balance for March and on import and export prices in April. Economists estimate that the trade balance widened to $60 billion in April from $58.4 billion the previous month.

On Friday, in addition to retail sales, the Commerce Department will release data on March business inventories, which are estimated to have risen 0.1%, less than the 0.3% rise in February.

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At a Glance

Today

Federal Reserve reports on consumer credit.

Treasury bill auction.

Quarterly earnings report due from McKesson.

Tuesday

House Financial Services panel holds hearing on the role of the secondary market in sub-prime mortgage lending.

Quarterly earnings reports due from Cisco Systems, Electronic Arts, Gateway, Walt Disney, Warner Music Group, Duke Energy, Harrah’s Entertainment, Revlon and Tenet Healthcare.

Wednesday

Fed policymakers meet to discuss interest rates.

Quarterly earnings reports due from DirectTV Group, News Corp., Toyota Motor, TXU and Whole Foods Markets.

Senate Environment panel holds hearing on emerging technologies and practices for reducing greenhouse gas emissions.

Thursday

Nation’s largest retailers announce sales figures for April.

Commerce Department reports on March international trade.

Labor Department reports on weekly jobless claims.

Treasury Department reports on federal budget for April.

Quarterly earnings reports due from American International Group, EchoStar Communications, Sara Lee, Viacom and Vonage Holdings.

Friday

Labor Department reports on producer price index for April.

Commerce Department reports on retail sales for April and on business inventories for March.

Securities and Exchange Commission Chairman Christopher Cox discusses “challenges and frontiers in securities regulation” at Rocky Mountain Securities Conference in Denver.

Quarterly earnings report due from Alcatel-Lucent.

Source: Times Staff and Wire Reports