Wall Street awaits Fed's rate decision this week

/ Source: The Associated Press

After weeks of stock market turbulence caused by soaring bond yields, Wall Street will now be able to gauge the chance of an interest rate hike straight from the source: the Federal Reserve.

On Wednesday and Thursday, the central bank’s Federal Open Market Committee meets to discuss interest rates. The Fed is widely expected to keep the benchmark rate steady at 5.25 percent, as it has done since last summer, but the policy statement it releases Thursday will be parsed for clues about future moves.

For months, policy makers have stated they expect the economy to recover, and that curbing costs is their primary concern in light of uncomfortably high inflation. Any change in that stance could rile the stock market.

Other data that could help investors decide whether inflation is rising at a worrisome pace is the Commerce Department’s Friday report on personal income and spending, which includes a reading on core personal consumption expenditures — or core PCE inflation. The year-over-year PCE figure is the Fed’s preferred inflation gauge, and is expected to have risen to 2.1 percent in May from 2.0 percent in April, according to the median estimate of economists surveyed Friday by Thomson Financial.

Personal income is expected to have risen 0.6 percent in May, up from a decline of 0.1 percent in April, and spending is expected to have increased 0.6 percent, slightly higher than the 0.5 percent rise in April.

Major indexes fell last week, with the Dow Jones industrials down 2.1 percent, the Standard & Poor’s 500 index down 2 percent and the Nasdaq composite index off 1.4 percent.

A heavy week for economic data
On Monday, the National Association of Realtors reports on existing home sales. The market expects the data to show a rise of 5.97 million in May, a similar increase to April’s 5.99 million.

Tuesday, the Conference Board issues its June consumer confidence index. The market predicts the index will slip to 105.3 from 108.0 in May.

Also Tuesday, the Commerce Department releases data on new home sales, which analysts expect to have gained by 920,000 units in May, slightly less than April’s rise of 981,000.

The Commerce Department reports Wednesday on orders of durable goods. Analysts predict that May durable goods will have fallen 1.0 percent after rising 0.8 percent in April.

On Thursday, the Commerce Department releases its final reading on first-quarter gross domestic product, which the market expects to come in at 0.6 percent, the same as the estimate made in May.

In addition to the personal spending data on Friday, investors will be watching for the Chicago Purchasing Managers’ index, a precursor to the Institute for Supply Management’s manufacturing index. The market forecasts a decline in the June index to 58.0 from 61.7 in May.

Also Friday, the University of Michigan releases its revised June sentiment index, which is expected to show a slight uptick.

The pace of earnings starts to pick up
On Tuesday, Lennar Corp. and Oracle Corp. release their quarterly results.

Analysts forecast Lennar’s second-quarter profit to come in at 8 cents a share. The homebuilder’s stock closed at $39.73 last Friday, at the low end of its 52-week range of $38.66 to $56.54.

Oracle is expected to post a fourth-quarter profit of 35 cents a share. The software company closed at $19.39 last Friday, at the high end of its 52-week range of $14.22 to $19.96.

On Wednesday, Bed Bath & Beyond Inc., which issued a profit warning earlier this month, reports its fiscal first-quarter results Wednesday. Profit is expected to come in at 37 cents a share. The stock closed last Friday at $37.14, in the middle of its 52-week range of $30.92 to $43.32.

General Mills Inc., Palm Inc. and Research in Motion Ltd. report on Thursday.

General Mills is expected to show fourth-quarter profit of 63 cents a share. The stock closed at $58.46 last Friday, in the top end of its 52-week range of $51.34 to $61.52.

Analysts anticipate Palm will post fourth-quarter profit of 15 cents a share. The stock closed at $16.80 last Friday, in the middle of its 52-week range of $13.51 to $19.50.

The market expects Research in Motion to report a second-quarter profit of $1.05 a share. The stock closed at $170.65 last Friday, near the upper end of its 52-week range of $62.12 to $177.42.