In the space of a few hours, the Federal Reserve will announce its latest policy on the nation's interest rates, and institutional traders — the big banks that run mutual funds, hedge funds and other investment vehicles — will react accordingly before the 4 p.m. close, attempting to strike the right balance between boosting their end-of-quarter returns and planning for future rate hikes.
This will likely result in heavy volume and wide swings in individual stock prices in the final hours of trading Thursday. But ultimately, those swings may not mean anything to investors holding stocks for the medium- to long-term, so a certain amount of forbearance, and intestinal fortitude, may be required.
However, "volatile" may not necessarily equal "bad." The Fed is likely to raise the nation's benchmark interest rate by another quarter percentage point to 3.25 percent, but could change its closely watched policy statement. If it does — and if the change signals an upcoming pause in rate hikes — the market could rally.
For the rest of the week, oil will remain a major concern for most investors amid only a handful of important earnings reports and economic data. Crude oil futures topped $60 per barrel for the first time Thursday, causing the stock market to plummet for two straight sessions. For the week, the Dow Jones industrial average lost 3.06 percent, the Standard & Poor's 500 fell 2.09 percent, and the Nasdaq composite index dropped 1.76 percent.
ECONOMIC DATA
After the volatility of Thursday, Friday's trading may signal the market's short-term direction, thanks to the ISM Index. The Institute for Supply Management measures the health of the nation's manufacturing sector, and its index for June, which comes out Friday morning, is expected to come in at 51.5, a slight increase from May's 51.4 reading.
A few other reports could move the markets earlier in the week, oil notwithstanding. The Conference Board's consumer confidence index, due Tuesday, is expected to improve to 104.1 in June, up from 102.2 in May. However, that expectation may have been made before oil prices surged last week, so a surprise on the negative side could occur.
On Wednesday, the Commerce Department will release its final figures for the first quarter's gross domestic product growth. GDP was expected to rise at an annual rate of 3.7 percent, up from previous first-quarter estimates of 3.5 percent.
EARNINGS
The technology sector could see some movement Wednesday as software maker Oracle Corp. reports its quarterly earnings before the session. Oracle is expected to earn 23 cents per share, up from 19 cents per share in the year-ago quarter. The company's stock is up 28.1 percent from its 52-week low of $9.78 on Aug. 12, 2004, closing Friday at $12.50.
Sporting goods maker Nike Inc. has had a more volatile ride, trading between $68.61 and $92.43 over the last year and closing Friday at $89.35. Wall Street analysts expect Nike to earn $1.28 per share, up from $1.13 per share a year ago, when it reports its earnings Monday morning.
Drug store chain WalGREen Co. is forecast to earn 38 cents per share, up from 33 cents per share last year, when it reports its earnings before Monday's session. The company's stock is up 27.2 percent from its 52-week low of $34.89 on Aug. 6, 2004, closing Friday at $44.38. Walgreen earnings could move retail stocks, many of which will report their monthly sales figures starting Friday and stretching into the following week.
EVENTS
The Fed's Open Market Committee is expected to issue its statement on interest rates at 2:15 p.m. EDT Thursday. The second quarter officially ends at 4 p.m. that day.
On Friday, automakers will be releasing their monthly sales data, which can move auto stocks a GREat deal.
