Wall Street Expects Obama’s Stimulus Measures

This week, investors on Wall Street will focus on the business results of numerous companies and banks, as well as the White House’s efforts to quickly adopt a proposal for stimulus measures aimed at curbing the recession of the American economy.

Last week, the Dow Jones index fell by 2.5 percent to 8,077 points. The S&P 500 index decreased by 2.1 percent to 831 points, while the Nasdaq index lost 3.4 percent, dropping to 1,477 points. Since the beginning of the year, the Dow Jones index has fallen by 8 percent, the S&P by 7.9 percent, and the Nasdaq index by 6.3 percent. On Friday, new U.S. President Barack Obama urged Congress representatives to reach an agreement on the proposed stimulus package worth $825 billion as soon as possible, as the American economy faces an unprecedented crisis. Data on home sales, unemployment claims, and preliminary data on the U.S. gross domestic product for the fourth quarter of last year, which will be released this week, are likely to show that Obama is entirely correct.

Analysts estimate that the U.S. GDP in the last quarter of last year fell at an annual rate of 5.4 percent, significantly higher than the 0.5 percent decline in the previous quarter. “This would be a very bad figure and probably the worst in the last 26 years,” says John Praveen, a strategist at Prudential International Investments Advisors. Therefore, Obama’s proposal for stimulus measures should be adopted as soon as possible, analysts say, and it is believed that Congress representatives could reach an agreement by February 26. “For investors, much depends on these stimulus measures. However, there is still a long way to go, and it will not be easy to achieve consensus. Even the smallest details are important. Investors want to know that these measures will not only provide short-term relief but will also stimulate sustainable growth,” says Craig Peckham, a strategist at Jefferies & Co.

This week, investors will also focus on the meeting of the leaders of the U.S. central bank on Tuesday and Wednesday. Analysts do not expect a reduction in the key interest rate, which is already at a record low of zero to 0.25 percent, but they do expect indications of the further direction of monetary policy. The earnings announcement season is at its peak. This week, 137 companies whose stocks are included in the S&P 500 index and 12 companies whose stocks are in the Dow Jones index will report their business results for the past quarter. Company revenues and profits have been declining for six consecutive quarters, and analysts expect that the results achieved in the last quarter of last year will be the weakest so far. It is estimated that companies whose stocks are included in the S&P 500 index will, on average, report a profit decline of about 28 percent, with seven out of ten sectors of the S&P index potentially recording double-digit declines. (H)