Wall Street looks to service, trade data

[June 04, 2007]  NEW YORK (AP) -- Summer's here, and investors will be watching to see if this week's economic data and the recent deal-making surge can keep stocks from succumbing to the seasonal doldrums.

Wall Street continues to push the Dow Jones industrials to new record highs, and just last week nudged the broader Standard & Poor's 500 index into record territory for the first time in more than seven years. However, investors are wondering whether the coming months will bring enough good news to lift stocks even higher.

Takeover activity will play a key role in the stock market's direction going forward; it's on pace to beat last year's record tally of $4 trillion, which has given investors confidence that corporate America is weathering the recent economic slowdown well and has a lot of cash on hand.

However, with Wall Street betting on an economic recovery later in the year and that the Federal Reserve will eventually lower interest rates, any evidence to the contrary might knock the market down.

Investors will be looking closely at the Institute for Supply Management's May index on the nation's service economy, scheduled to be released Tuesday. According to the median estimate of economists surveyed Friday by Thomson Financial, the market expects the index to slip to 54.0 from April's reading of 54.7. A reading above 50 indicates expansion in the service sector, a diverse group of industries that represents about 80 percent of U.S. economic activity and includes retailing, banking, construction and agriculture.

On Friday, the focus will be on the international trade balance. The market predicts the Commerce Department will report the trade deficit narrowed to $63.1 billion in April, after widening to a six-month high of $63.9 billion in March.

Last week, the Dow posted a 1.19 percent gain, the S&P 500 index rose 1.36 percent, and the Nasdaq composite index added 2.22 percent.

A modest schedule of economic data ...

The Commerce Department reports Monday on April factory orders, which are expected to have risen 0.7 percent after a 3.1 percent jump in March.

The Labor Department on Wednesday releases its revised reading on first-quarter worker productivity. The market anticipates the figure to register at 1.5 percent, down from the previous estimate of 1.7 percent.

Also Wednesday, Richmond Fed President Jeffrey Lacker will speak in Frederick, Md., about the inflation outlook, and Kansas City Fed President Thomas Hoenig will speak in Cody, Wyo., about the U.S. economy and monetary policy.

On Thursday, the Commerce Department reports on wholesale inventories, and the Federal Reserve reports on consumer credit. The market expects wholesale inventories to have gained 0.4 percent in April after increasing 0.3 percent in March, and consumer credit to have increased by $3.5 billion in April after a huge jump in March of $13.5 billion.

... and an even lighter slate of earnings

On Monday, Krispy Kreme Doughnuts Inc. releases first-quarter earnings, which analysts predict will come in at 5 cents a share. Krispy Kreme closed Friday at $8.67, in the lower half of its 52-week range of $7.14 to $13.93.

National Semiconductor Corp. on Thursday releases fiscal fourth-quarter earnings. Analysts expect the chip maker to report a profit of 23 cents a share. The stock closed Friday at $26.69, in the upper half of its 52-week range of $20.56 to $28.08.

Also Thursday, Smithfield Foods Inc. reports fiscal fourth-quarter earnings, and analysts predict its profit to come in at 36 cents a share. The world's largest pork producer ended Friday at $32.59, at the upper end of its 52-week range of $24.40 to $33.25.

[Text copied from Associated Press file; article by Madlen Read, AP business writer]