Wall Street braces for more volatility

Investors are exhausted after their whipsaw week, and they’re not ruling out another one.

All the assumptions Wall Street made when it recovered from steep losses last week -- that the Federal Reserve will cut rates again, that President Bush’s stimulus plan will proceed and that any recession that occurs might be shallow and quick -- are going to be tested.

Tonight, Bush will make his State of the Union address. If it looks like the proposed $150-billion tax rebate for Americans could hit a snag in Congress, the markets’ fears about consumer spending could balloon again.

Then on Wednesday, the Fed -- which helped put a floor under the market last week by making an emergency, three-quarter-point rate cut -- will finish its two-day meeting and release its rate decision. A failure to deliver the quarter-point reduction that traders are betting on, or signs that the Fed is hesitant to loosen its policy further, could send stocks sliding.

And Friday, two snapshots of U.S. manufacturing and employment will tell investors how the economy fared in January. Economists expect jobs to increase but manufacturing activity to contract.

Wall Street, which lived up to its fickle reputation last week, could even be disappointed if it gets exactly what it wants but little else.

“If their expectations are met, they quickly ask, what’s next?” said Alan Gayle, senior investment strategist for Trusco Capital Management.

Last week, after plunging, posting its biggest one-day upswing in five years and then ending the week with a loss, the Dow Jones industrial average finished the week up 0.9%. The blue-chip index, down 8% since the beginning of the year, is on pace to log its worst January since 1960.

The Standard & Poor’s 500 index finished the week 0.4% higher, while the Nasdaq composite index closed down 0.6%.

--

At a glance

Today

Commerce Department reports on new-home sales.

Quarterly earnings reports expected from American Express, Corning, Halliburton, McDonald’s, Tyson Foods and Verizon Communications.

Tuesday

Federal Open Market Committee meets to discuss interest rates.

Commerce Department reports on durable goods orders.

Conference Board releases its consumer confidence index.

Quarterly earnings reports due from 3M, Allstate, American Electric Power, Burlington Northern Santa Fe, Countrywide Financial, Dow Chemical, Eli Lilly, EMC, JetBlue Airways, Northwest Airlines, Occidental Petroleum, Travelers, United States Steel, Valero Energy and Yahoo.

Wednesday

Commerce Department reports on fourth-quarter gross domestic product.

Quarterly earnings reports expected from Altria Group, Amazon.com, Boeing, Eastman Kodak, Kellogg, Kraft Foods, Merck, NCR, Pulte Homes, Royal Caribbean Cruises, Southern, Starbucks and United Parcel Service.

Thursday

Commerce Department reports on personal income and spending.

Labor Department reports on employment cost index.

Labor Department reports on weekly jobless benefit claims.

Freddie Mac reports on mortgage rates.

Quarterly earnings reports due from Anheuser-Busch, Bristol-Myers Squibb, Burger King Holdings, Colgate-Palmolive, CVS Caremark, Electronic Arts, E.W. Scripps, Google, Hanesbrands, MasterCard, Mattel, MBIA, McKesson, Media General, Nasdaq Stock Market, New York Times, Newell Rubbermaid, Procter & Gamble, Raytheon and Western Union.

Friday

Labor Department reports on employment.

Commerce Department reports on construction spending.

Institute for Supply Management releases its manufacturing index.

Major automakers report on U.S. auto sales for January.

Quarterly earnings reports due from Chevron, Exxon Mobil and Gannett.

Source: Associated Press