Vital Signs: The Fed's Next Move

On deck: Federal Reserve's policy meeting, first-quarter GDP, and April data on consumer confidence, manufacturing activity, and employment

You might want to keep your seatbelt fastened during this week. The markets have a number of high-profile economic reports to digest, as they brace for the results of the Federal Reserve's policy meeting. As usual, the Fed will take center stage with a policy decision that comes at an especially crucial time. Reports are expected to show the economy continues to weaken, but some policymakers fear that more rate cuts could fuel inflation.

Given the success of the Fed's various lending facilities in boosting liquidity and calming anxiety in the credit markets, especially since the Bear Stearns (BSC) crisis, most economists are betting policymakers will cut their target rate by a quarter-percentage point, to 2%, on Wednesday, Apr. 30, while issuing a statement (due at 2:15 p.m.) that continues to emphasize the downside risks to the Fed's outlook for economic growth. Futures contracts currently rate the probability of a quarter-point move at about three-out-of-four, with a one-in-four chance for no change and no bets at all on a half-point move.

The Fed will have a good idea of what the economy looked like in the first quarter, given that the GDP data will come out on the morning of the Apr. 30 rate decision. Economists expect first-quarter economic growth to be essentially zero, perhaps either a small plus or a small minus. They expect consumer spending and business investment to post gains, but much smaller than in the fourth quarter, and they look for another very large drop in home construction. Foreign trade and inventories are expected to provide small pluses. Inventories will be of particular interest, because monthly data have suggested stockpiles may have grown faster than businesses wanted. If so, that could turn into a drag on second-quarter GDP growth, as companies cut output on order to bring inventories into better balance with sales.

This quarter promises to be much weaker than the first quarter in terms of overall GDP growth. Consumers are facing up to growing uncertainty about the outlook, soaring gas prices, and rising unemployment, even as housing shows few signs of stabilizing, and as businesses are becoming increasingly hesitant to increase their capital spending and expand their operations.

Two April soundings will provide the first broad look at how the economy began the current quarter. The Institute for Supply Management's index of manufacturing activity on Thursday, May 1 will give an indication of the extent of production cutbacks, and the Labor Dept.'s employment report on Friday, May 2 will suggest the depth and breadth of job market weakness. Economists expect some further slippage in factory activity, and they look for April payrolls to post a fourth consecutive decline and a further increase in the jobless rate.

Here's the weekly economic calendar, from Action Economics.

Top Economic Reports
Reports Date Time For Median Estimate Last Period
Consumer Confidence Tuesday, April 29 10:00 a.m. April 60.0 64.5
Gross Domestic Product (Advance) Wednesday, April 30 8:30 a.m. Q1 0.2% 0.6%
GDP Chain Price Index Wednesday, April 30 8:30 a.m. Q1 3.0% 2.4%
Employment Cost Index Wednesday, April 30 8:30 a.m. Q1 0.8% 0.8%
Chicago Purchasing Managers Index Wednesday, April 30 9:45 a.m. April 48.0 48.2
Personal Income Thursday, May 1 8:30 a.m. March 0.4% 0.5%
Personal Consumption Expenditures Thursday, May 1 8:30 a.m. March 0.3% 0.1%
ISM Index (Manufacturing) Thursday, May 1 10:00 a.m. April 48.1 48.6
Construction Spending Thursday, May 1 10:00 a.m. March -0.6% -0.3%
Domestic Auto Sales (millions) Thursday, May 1 afternoon April 5.0 4.9
Domestic Light Truck Sales (millions) Thursday, May 1 afternoon April 6.4 6.2
Nonfarm Payrolls (thousands) Friday, May 2 8:30 a.m. April -60.0 -80.0
Manufacturing Payrolls (thousands) Friday, May 2 8:30 a.m. April -35.0 -48.0
Unemployment Rate Friday, May 2 8:30 a.m. April 5.2% 5.1%
Average Hourly Earnings Friday, May 2 8:30 a.m. April 0.3% 0.3%
Average Workweek (hours) Friday, May 2 8:30 a.m. April 33.7 33.8
Factory Orders Friday, May 2 10:00 a.m. March 0.4% -1.3%
Other reports and events
Reports Date Time For
Housing Vacancies Monday, April 28 10:00 a.m. Q1
Dallas Fed Survey Monday, April 28 10:30 a.m. April
Johnson Redbook Weekly Store Sales Tuesday, April 29 8:55 a.m. Apr. 20-26
ICSC-UBS Store Sales Tuesday, April 29 7:45 a.m. Apr. 20-26
S&P Case Shiller Home Price Index Tuesday, April 29 9:00 a.m. February
FOMC meeting (first day) Tuesday, April 29 9:00 a.m.
Mortgage Applications Wednesday, April 30 7:00 a.m. Apr. 20-26
ADP Employment Data Wednesday, April 30 8:15 a.m. April
Initial Unemployment Claims Thursday, May 1 8:30 a.m. Apr. 20-26
Earnings Calendar
Company Report Date
SYSCO Monday, April 28
Humana Monday, April 28
Manitowoc Monday, April 28
HPC Monday, April 28
Total System Services Monday, April 28
Hartford Financial Services Group Monday, April 28
Plum Creek Timber Monday, April 28
Microchip Technology Monday, April 28
WM Wrigley Jr. Monday, April 28
Verizon Communications Monday, April 28
Loews Monday, April 28
Tyson Foods Monday, April 28
Radio Shack Monday, April 28
Questar Monday, April 28
McGraw-Hill Cos Tuesday, April 29
Corning Tuesday, April 29
Waste Management Tuesday, April 29
Archer-Daniels-Midland Tuesday, April 29
CBS Tuesday, April 29
Simon Property Group Tuesday, April 29
Medco Health Solutions Tuesday, April 29
Bemis Tuesday, April 29
Countrywide Financial Tuesday, April 29
Ashland Tuesday, April 29
Burlington Northern Santa Fe Tuesday, April 29
Lincoln National Tuesday, April 29
ACE Ltd Tuesday, April 29
TECO Energy Tuesday, April 29
General Growth Properties Tuesday, April 29
Express Scripts Tuesday, April 29
Boston Properties Tuesday, April 29
Embarq Tuesday, April 29
CB Richard Ellis Group Tuesday, April 29
Valero Energy Tuesday, April 29
United States Steel Tuesday, April 29
Convergys Tuesday, April 29
Office Depot Tuesday, April 29
Liz Claiborne Tuesday, April 29
Pinnacle West Capital Tuesday, April 29
Avon Products Tuesday, April 29
Trane Tuesday, April 29
Masco Tuesday, April 29
Centerpoint Energy Wednesday, April 30
Dean Foods Wednesday, April 30
FPL Group Wednesday, April 30
International Paper Wednesday, April 30
National Oilwell Varco Wednesday, April 30
Unisys Wednesday, April 30
Constellation Energy Group Wednesday, April 30
Time Warner Wednesday, April 30
IAC/InterActiveCorp Wednesday, April 30
Ingersol-Rand Wednesday, April 30
Kraft Foods Wednesday, April 30
Procter & Gamble Wednesday, April 30
Southern Wednesday, April 30
Kellogg Wednesday, April 30
Unum Wednesday, April 30
Allegheny Energy Wednesday, April 30
Allied Waste Industries Wednesday, April 30
Starbucks Wednesday, April 30
AvalonBay Communities Wednesday, April 30
Millipore Wednesday, April 30
Fiserv Wednesday, April 30
Prudential Financial Wednesday, April 30
Centex Wednesday, April 30
JDS Uniphase Wednesday, April 30
DTE Energy Wednesday, April 30
OfficeMax Wednesday, April 30
Murphy Oil Wednesday, April 30
Sunoco Wednesday, April 30
Symantec Wednesday, April 30
Reynolds American Wednesday, April 30
Equity Residential Wednesday, April 30
Sealed Air Wednesday, April 30
Interpublic Group of Cos Wednesday, April 30
Hess Wednesday, April 30
Cincinnati Financial Wednesday, April 30
Akamai Technologies Wednesday, April 30
Cummins Wednesday, April 30
MeadWestvaco Wednesday, April 30
Jones Apparel Group Wednesday, April 30
Colgate-Palmolive Wednesday, April 30
Expedia Thursday, May 1
Rowan Cos Thursday, May 1
Williams Cos Thursday, May 1
Cardinal Health Thursday, May 1
International Flavors & Fragrances Thursday, May 1
CenturyTell Thursday, May 1
Assurant Thursday, May 1
Xcel Energy Thursday, May 1
Tyco Electronics Thursday, May 1
Apache Thursday, May 1
Kimco Realty Thursday, May 1
Watson Pharmaceuticals Thursday, May 1
Tyco International Thursday, May 1
CVS Caremark Thursday, May 1
Cigna Thursday, May 1
Eastman Kodak Thursday, May 1
Cameron International Thursday, May 1
Monster Worldwide Thursday, May 1
AON Thursday, May 1
Metlife Thursday, May 1
Qlogic Thursday, May 1
Automatice Data Processing Thursday, May 1
Chesapeake Energy Thursday, May 1
General Motors Thursday, May 1
Marathon Oil Thursday, May 1
Affiliated Computer Services Thursday, May 1
Dominion Resources Thursday, May 1
Comcast Thursday, May 1
Noble Energy Thursday, May 1
Exxon Mobil Thursday, May 1
Wyndam Worldwide Thursday, May 1
Sun Microsystems Thursday, May 1
First Energy Thursday, May 1
Clorox Thursday, May 1
Apartment Investment & Management Friday, May 2
NiSource Friday, May 2
Chevron Friday, May 2
Weyerhauser Friday, May 2
American Tower Friday, May 2
Duke Energy Friday, May 2
Viacom Friday, May 2
Consolidated Edison Friday, May 2
Sempra Energy Friday, May 2
EOG Resources Friday, May 2
Washington Post Friday, May 2
Ameren Friday, May 2
IntercontinentalExchange Friday, May 2
PPL Friday, May 2
Public Storage Friday, May 2
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