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Sunday, January 30, 2005

Wall Street Week Ahead: Iraq to Set Mood

NEW YORK (Reuters) - Wall Street will turn its attention toward Iraq over the weekend, watching for any major disruptions during Sunday's election there and whether it will affect the country's oil output.
Investors are worried that major violence in Iraq could choke off its oil exports and push crude oil prices closer to the $50 level.
Rising oil prices have grabbed Wall Street's attention again, as the market worries that higher energy costs will pinch corporate profits and hit consumers in the wallet.
"If things go off without too much of a hitch in Iraq, then we could have a pretty good week," said Edgar Peters, chief investment officer and director of PanAgora Asset Management Inc. "I think you could see a sentiment bounce."
Market bulls are certainly looking for something to cheer about.
For the week, U.S. stocks ended slightly higher -- marking their first weekly gain of 2005. The Dow Jones industrial average finished the week up 0.32 percent, while the Standard & Poor's 500 index gained 0.29 percent, and the Nasdaq Composite Index inched up 0.08 percent.
In contrast, all three major U.S. stock indexes are down for January -- and the year to date. Through Friday's close, the Dow was down 3.3 percent for the month and the year so far, while the S&P 500 was off 3.35 percent, and the Nasdaq was down 6.4 percent.
"The market overreacted in January," Peters added, saying that the market is undervalued and that he expected buyers to return to the table in February.
Interest rates also will be in focus next week, when the Federal Reserve's policy-making committee meets. The Fed is expected to raise rates another quarter percentage point. The decision will be announced on Wednesday at the conclusion of the Federal Open Market Committee's two-day meeting.
Higher interest rates weigh on stocks as they increase borrowing costs for businesses and consumers.
Market strategists have hoped that the Fed will continue with a gradual pace of rate hikes, as a more aggressive approach to stave off inflation would drag heavily on the market