Focus Returns To Economy

With earnings season nearly over, the focus this week will return to the economy, with the Federal Reserve expected to raise interest rates for the eighth time in a year on Tuesday, and April unemployment data slated for Friday.

Investors will be looking for the Fed to maintain its promise to raise interest rates gradually, but given the recent slowdown in the economy, they may begin to look for signs that the Fed’s rate hike campaign will eventually draw to a close. The Fed funds rate will likely stand at 3% after tomorrow; with core consumer inflation hovering around 3-3.5%, the Fed should be done raising rates in the next few months unless inflation picks up markedly.

Economists estimate that the economy added 175,000 jobs last month; consistent monthly job growth of 150,000-200,000 would likely be enough to sustain the recovery without overheating.

Let’s hope the economy gives us just that — moderate inflation and sustained job growth. Goldilocks, anyone?

Stocks rose Monday ahead of Tuesday’s Fed meeting, as traders shook off a weaker than expected manufacturing report and rising oil prices.

The Nasdaq rose 7 to 1928, the S&P 500 gained 5 to 1162, and the Dow climbed 59 to 10,251. Volume declined to 2 billion shares on the NYSE, and 1.6 billion on the Nasdaq. Advancers led 21-11 on the NYSE, and 16-14 on the Nasdaq. Upside volume was 67% on the NYSE, and 57% on the Nasdaq. New highs-new lows were 69-51 on the NYSE, and 29-240 on the Nasdaq.

After the close, EDS beat estimates but warned. Macrovision and Websidestory fell on their results.

During the day, Qwest rose after the company withdrew from its bidding war with Verizon for MCI .

Nortel lost 7% after the company reported sharply lower fourth-quarter earnings and issued a disappointing forecast.