August has been an unusually busy time for Wall Street, with a key Federal Reserve decision and surprisingly good economic data keeping investors busy, culminating in a strong rally last week that pushed the major indexes to three-month highs.
This week, however, will be the Wall Street equivalent of a humid, hazy, summer Sunday afternoon — slow. With barely any corporate earnings of note and no economic data even due until Wednesday, Wall Street’s biggest challenge will be in preserving the momentum from last week, or at least not losing any ground.
Benign inflation data last week, including an unexpected drop in core wholesale prices, led some investors to believe that the Federal Reserve’s decision to hold off on raising rates two weeks ago was the right one. More importantly, it now seems less likely that the Fed would resume raising rates again, at least for now.
However, while stocks rallied sharply Tuesday and Wednesday, trading Thursday and Friday was thin, and the indexes were little changed. Certainly, there wasn’t enough news on par with the inflation data to keep stocks going, but it does raise the question of whether last week’s gains have staying power or were just a fluke.
If the markets can hold on to their gains in a week with little reason to even trade, then it could bode well for extending the rally into September — when there might actually be news worth acting on.
Last week, the Dow Jones industrials rose 2.65 percent, the Standard & Poor’s 500 index gained 2.81 percent and the Nasdaq composite index surged 5.16 percent.
The National Association of Realtors will issue its existing home sales report for July on Wednesday, which will be closely watched by investors in the housing sector. Existing sales are expected to slip to an annualized rate of 6.58 million, compared to 6.62 million in sales for June.
On Thursday, the Commerce Department reports on new home sales for July, which are expected to decline 1.1 million from 1.131 million in June. Both housing reports will likely spur activity in the housing and construction sectors, but unless the numbers are far worse than expected, the overall market could take little note.
Finally, also on Thursday, Commerce will issue its July report on orders for durable goods, defined as big-ticket items expected to last at least three years. Durable goods orders are expected to be flat in July, compared to a sharp 2.9 percent jump in June.
The second-quarter earnings season has just about wrapped up, with only a few stragglers left to report their results. Among those, the biggest is Lowe’s Cos. Inc., the home improvement retailer, which is expected to post earnings of 61 cents per share, up from 52 cents per share a year ago, when it releases its results Monday morning. Lowe’s stock has slid steadily throughout 2006, and is off 15.3 percent from its 52-week high of $34.85 on Dec. 16, 2005, closing Friday at $29.52.
Continuing with the week’s housing theme, luxury homebuilder Toll Brothers Inc. is due out with its results Tuesday morning, and is expected to earn $1.04 per share, down from $1.27 per share a year ago. The cooling housing market has dealt a blow to Toll’s share price, which has tumbled 50.1 percent from its 52-week high of $51.72 on Aug. 25, 2005. Toll closed Friday at $25.79.