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September 10, 2008 > Wall Street wobbles as economic landscape shifts

Wall Street wobbles as economic landscape shifts

By Madlen Read, AP Business Writer

NEW YORK (AP), Sep 05 _ The stock market has lurched back near its July lows _ but Wall Street's woes are a bit different now than they were then.

In July, investors were vexed about record-high oil prices; since that time, crude has fallen nearly 28 percent. Back then, financial services companies were dragging down the broader market; over the past two months, the financial sector has outperformed the major stock indexes.

But with the employment picture deteriorating and uncertainty running high over the health of some key financial players, the market remains on shaky ground _ as evidenced by the Dow Jones industrial average's 344-point drop last Thursday.

With data on retail sales, pending home sales, the trade deficit and wholesale inflation on tap this week, investors appear to be hoping for the best but bracing for the worst.

``Right now, the momentum seems to be more negative than positive,'' said Michael Materasso, senior vice president and co-chair of Franklin Templeton fixed-income policy committee.

The Dow finished last week 2.79 percent lower, even after rising modestly Friday despite a big jump in the unemployment rate. The Standard & Poor's 500 index ended the week down 3.16 percent, while the Nasdaq composite index dropped 4.72 percent.

Wall Street has been hesitant to make any long-term bets on stocks not only because of the weak U.S. economy, but also because of the teetering global economy. On the surface, it's a positive that oil has fallen and that the dollar has rebounded. But investors know the reason for the shift is that other countries are following the United States into an economic slowdown.

``You're seeing a big shift in forecasts for global economic growth, and that's definitely having its impact on the markets,'' Materasso said.

If the United States beats other developing nations in rebounding from what many economists are calling a consumer recession, the U.S. stock market should benefit.

``The U.S. is first in; it's probably first out. That's what the dollar is reflecting,'' said Richard E. Cripps, chief market strategist for Stifel Nicolaus. ``But the light at the end of that tunnel isn't here yet.''

Given the scanty signs of an economic rebound, there are few investors bold enough to make big bets on U.S. stocks _ particularly with so many U.S. companies dependent on overseas revenue, and as questions linger about the health of the financial industry.

So the Dow is apt to stay volatile, jumping higher and lower in triple-digit swings, and perhaps falling back toward the two-year lows it reached back in July.

``There's just no buying conviction in this market,'' Cripps said. ``This market looks like it wants to test the lows it had in July ... That's where your buying conviction will come in.''

This week, the National Association of Realtors is expected to report a dip in pending home sales; the Commerce Department is anticipated to report a widening of the international trade gap; and the Labor Department is expected to show a decline in last week's jobless claims.

On Friday, the Labor Department will release its reading on wholesale inflation, and investors will see whether their inflation worries have truly dissipated. The Producer Price Index is expected to have fallen by 0.5 percent in August after spiking by 1.2 percent in July, according to the median estimate of economists surveyed by Thomson/IFR.

The core index _ which strips out food and energy prices _ is expected to inch up by 0.2 percent.

Also Friday, the Commerce Department reports on August retail sales; after poor monthly sales from individual retailers last week, economists are predicting a modest rise of 0.3 percent.

AP-CS-09-05-08 1959EDT

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