By Theresa Sheehan

PRINCETON (SMRA) – The week ahead is centered on the Federal Open
Market Committee meeting that takes places Tuesday and Wednesday, and
the monetary policy statement that will follow Wednesday afternoon.

There is a fair amount of economic data, but little that will stir
up a lot of market interest before Friday’s release of the advance
estimate of first quarter GDP.

The U.S. Treasury will be auctioning the last round of coupon
issues before the quarterly refunding conference takes place. Wall
Street will be watching the abundance of earnings reports set for
release over the course of the week.

Tuesday and Wednesday’s FOMC meeting is not expected to result in
more than incremental changes to the statement when it is released. The
Committee is likely to do no more than note improvements in economic
conditions are still subject to significant risks and that inflation
remains subdued.

Kansas City Fed President Hoeing will more than likely register his
third consecutive dissent against the “extended period” language unless
a compromise is worked out. We do not think that it will change at this
meeting, but will almost certainly evolve over the course of the summer.

The FOMC will be reviewing its economic forecast. However, the
conclusions will not be known until the meeting minutes are released
Wednesday, May 19. The FOMC will also have the results of the latest
Senior Loan Officer Survey. We should get a look at that report on
Monday, May 3, if the usual pattern of publication is followed.

The Reserve Bank of New Zealand makes its routine monetary policy
statement late Wednesday in U.S. time. We anticipate it will signal the
end of its period of holding the official cash rate at 2.50%, in place
since April 2009. We do not expect the RBNZ to start hiking rates until
its subsequent meeting on June 10; the previous guidance was for the end
of the second quarter 2010. This would be similar to the direction taken
by the Bank of Canada in their statement April 20.

The highlight of the week’s economic data will almost certainly be
the advance estimate of first quarter GDP Friday morning. Markets will
be watching to see how much momentum has been lost from the growth
associated with the fiscal stimulus in the fourth quarter. Since
consumer spending was decent in the first quarter, and inventories
continue to rebuild, the first quarter may look fairly solid.

The direction of consumer confidence at the start of the second
quarter may be a cause for concern; signaling a possible pull back in
spending. The preliminary Reuters/University of Michigan Consumer
Sentiment Index for April fell 4.1 points to 69.5 from the final reading
in March. If there is no upward revision in the final report for April
out Friday, it could suggest that consumers are retreating once again.

The Conference Board’s Consumer Confidence Index for April is
scheduled for mid Tuesday morning, and could hint at the direction of
the revision — if any — for Sentiment Index. The weekly ABC Consumer
Comfort Index is pointing towards another drop in confidence, so this
monthly index is likely to decline from the prior month.

The Conference Board report will also include perceptions of the
labor market with measures of jobs plentiful and jobs hard-to-get. These
will be taken into account in looking forward to the April employment
report when it is released on Friday, May 7. Buying plans will also be
scrutinized for hints of consumer intentions regarding spending.

The February data for the S&P/Case-Shiller Home Price Index is set
for release Tuesday morning. Home values continue to struggle to gain
ground, but in most cases are generally stabilizing. That in itself is
progress, but prospective buyers are still demanding rock bottom prices
and mortgage lenders are reluctant to agree to higher appraisals. There
may also be some pressure from the end of the second version of the
homebuyer tax credit that requires that contracts be in place by the end
of April. Those who want to catch the window of opportunity to sell may
be making price concessions.

Regional surveys of conditions in the factory and service sectors
will inform expectations for the ISM indexes and payrolls numbers next
week.

There are manufacturing surveys for April from the Dallas, Richmond
and Kansas City Fed banks that will add to what is known from the New
York and Philadelphia reports. The Texas Manufacturing Outlook is
midmorning Monday, the Richmond surveys of manufacturing and service
sector conditions are out Tuesday, and the Kansas City Manufacturing
Survey is released late Thursday morning.

The Chicago Purchasing Managers Business Barometer for April is out
Friday morning, and covers both manufacturing and service sector
companies.

The Chicago Fed’s National Activity Index for March is scheduled
for 8:30 ET on Thursday. It lags the other regional reports by a month,
but is useful to analysts as a measure of overall economic conditions.

The Employment Cost Index for the first quarter 2010 Friday morning
will include annual revisions that will be issued on Wednesday. Gains in
compensation have been quite slow in recent quarters, and this report
should be in line with that. Benefits costs have been rising, but
companies have also increased employees’ share of insurance payments.

The annual revisions for retail and food sales will be released on
Friday morning. Revisions are usually small and offsetting, and it
should not change the picture of retail spending in the first quarter.

Another big round of supply of Treasury notes will be auctioned off
over the course of the week. This will comprise 5-year TIPS notes on
Monday, 2-year notes on Tuesday, 5-year notes on Wednesday, and 7-year
notes on Thursday.

These are the last coupon offerings from the US Treasury until the
quarterly refunding announcement on Wednesday, May 5.

There are numerous earnings reports scheduled for the entire week.
Many of the major financial firms have already reported, but more are on
the way. However, attention will widen to other industries like
commercial builders, real estate trusts, retailers, energy,
transportation, communications, healthcare, and manufacturers of durable
goods.

On Monday, reports are expected from BlackRock, Boston Scientific,
Caterpillar, Limited, Human Genomes Sciences, Humana, Lorillard, MDU
Resources, MGIC Investment Corp., Nicor, Provident Financial Holdings,
Roper Industries, Texas Instruments, and Whirlpool.

On Tuesday, the reports include 3M, Aflac, ADP, Avery Dennison,
Boston Properties, Broadcom, Celanese Corp., CIT Group, Convergys,
Cummins, Delphi Financial Group, Flextronics, Deutsche Bank, Diebold,
DuPont, Lexmark International, Newmont Mining, Norfolk Southern, Office
Depot, Stanley Black & Decker, Taiwan Semiconductor, McGraw Hill, Tyco
International, UAL, UPS, USX, US Airways, and Valero Energy Corp.

On Wednesday, the reports are from AOL, Barrick Gold, Comcast,
Corning, Equifax, Equity Residential, Ethan Allen, General Dynamics,
GlaxoSmithKline, Goodyear, Honda, JetBlue Airways, Kaiser Aluminum, LSI
Corporation, MeadWestvaco, Northrop Grumman, Owens Corning, Praxair,
Realty Income Corporation, Sealed Air, Sprint Nextel, Allstate, Dow
Chemical, Tyco Electronics, VeriSign, Visa, and Wellpoint.

Thursday sees reports from Aetna; Apache Corporation; AstraZeneca’
Ball Corporation; Becton, Dickinson and Company; BorgWarner;
Bristol-Myers Squibb; Burger King; Cardinal Health; Celgene Corp.;
Chicago Mercantile Exchange Holdings; Colgate-Palmolive; ConocoPhillips;
Dana Holding Corporation; Duke Realty; Eastman Kodak; Entergy; Expedia;
ExxonMobil; Fiserv; Genworth Financial; Hartford Financial Services;
International Paper; Kellogg; KLA-Tencor; MetLife; Michelin; Motorola;
Noble Energy; Occidental Petroleum; OfficeMax; Proctor & Gamble; Revlon;
Safeway; Sunoco; Teledyne Technologies; Tenneco Inc.; Time Warner Cable;
Unilever; Viacom; Waste Management; and Weyerhaeuser.

Friday concludes the week with earnings data from AIG International
Real Estate, Aon, Apartment Investment & Management, Avon Products, CB
Richard Ellis Group, Chevron, ITT, Magellan Health Services, Newell
Rubbermaid, Oppenheimer Holdings, and VF Corporation.

** Stone & McCarthy Research Associates **

[TOPICS: M$$CR$,M$$FI$,M$U$$$,MMUFE$]