November has been a nerve-wracking month for Wall Street, and investors are hoping this week’s readings on economic growth, home sales and inflation don’t meet their worst fears.
The Dow Jones industrial average is on pace to post the biggest monthly loss since September 2002. Sentiment certainly has shifted since early October, when the overriding belief on Wall Street was that the credit crisis was largely over.
Since then, dozens of financial institutions have revealed huge losses on risky mortgages — even Fannie Mae and Freddie Mac, government-sponsored entities that private lenders rely on to buy their mortgages in hard times.
Meanwhile, the credit markets remain very squeezed, so the companies that depend on them have several tough quarters ahead as they overhaul their investment strategies and wait for the housing market to bottom out.
Last week, the blue-chip index shed 1.49 percent; the Standard & Poor’s 500 index fell 1.24 percent, the Nasdaq composite index slid 1.54 percent.
The only chances for a December rally, it seems, are another interest rate cut from the Federal Reserve, or data showing businesses and consumers are more resilient than investors believe.
The National Association of Realtors reports Wednesday on October’s existing home sales, and Thursday, the Commerce Department reports on October’s new home sales. Both are expected to show declines from September.
Wall Street is hoping other data released this week is more promising.
Last month, the Commerce Department estimated that gross domestic product grew 3.9 percent last quarter, and now, economists anticipate that it will revise that estimate up to 4.8 percent.
Economists are mixed in their forecasts of Wednesday’s durable goods report, but on average they anticipate an October uptick in orders of 0.3 percent after a September decline of 1.7 percent.
Economists also expect the Conference Board’s November index on consumer confidence to hold at its October level, which was a two-year low.
And they see Friday’s personal spending report showing a rise of 0.3 percent, and core personal consumption expenditures — an inflation measure — is anticipated to come in at 1.8 percent, within the Fed’s comfort range.
The market is pricing in a high chance of a Fed rate cut, but it’s not guaranteed. The central bank, which meets next on Dec. 11, said the decision to go ahead with a quarter-point cut on Oct. 31 was a close call. A falling dollar and surging oil prices continue to threaten higher inflation, even as policy makers expect growth to slow into next year.
Earnings scheduled for next week include Canadian banks such as Bank of Montreal, the National Bank of Canada, and Toronto Dominion Bank, and big-name consumer brands like Dell Inc., Staples Inc. and Sears Holdings Corp.
The Dow is still up 4.15 percent on the year, but had been up more than 13 percent year-to-date in early October. The Nasdaq is up 7.51 percent, while the S&P is up 1.58 percent.