Investors Await Mortgage, Housing Market, Inflation Data
Wall Street has been reveling in the interest rate standstill of the past nine months, and investors hope this week’s data on consumer inflation and the housing market won’t suggest things are about to change.
The Dow Jones average has been climbing to record highs, but on a tight rope. The stock market should keep advancing as long as the economy keeps growing and inflation doesn’t accelerate, market experts say, but data indicating otherwise could cause a tumble.
It would also cause mortgage rates to rise, most likely.
The stock market dipped Thursday when retailers reported generally dismal April sales, a day after the Fed repeated that its main concern is not the slow economy, but high inflation.
Wall Street regained its footing Friday, as core wholesale inflation came in flat for the second month in a row - suggesting the Fed may not need to raise rates to curb inflation, and may even lean toward a cut later in the year.
The Dow rose 0.46 percent last week, the Standard & Poor’s 500 index inched up 0.02 percent, and the Nasdaq composite index slipped 0.39 percent.
But because the Fed is more focused on the consumer-level inflation - and because last week’s drop was hardly the big correction many analysts have anticipated - investors will be particularly interested on Tuesday in the Labor Department’s Consumer Price Index for April.
The market expects the CPI to rise 0.4 percent, a smaller jump than the 0.6 percent increase in March, according to the median estimate of economists surveyed by Thomson Financial.
The core index, which strips out food and energy prices, is expected to rise 0.2 percent, a bigger increase than March’s 0.1 percent rise.
Investors will also examine data on sluggish housing and turbulent mortgage markets to gauge the economy’s health.
The National Association of Home Builders on Tuesday will release its housing market index, and Wednesday, the Commerce Department reports on U.S. home building permits and housing starts.
Economists predict the NAHB’s April index to stay flat compared to March, April building permits to post a 1.53 million gain, a bit lower than in March; and April housing starts to rise 1.49 million, a smaller gain than in the previous month.
So far, despite widespread concerns, bad credit home loan problems haven’t impacted the U.S. economy as a whole, but some worry that will change.
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