Wall St. Casts a wary eye on the economy

Reports on manufacturing, employment could make investors jittery in the coming week.

Your job 2006
8 ways to be a better boss
Clear your desk of the family pictures?
7 tips for a job in a tougher market
Why the job market is worse than you think
Unusual benefits: Goldman Sachs focuses on the sex change

NEW YORK (AP) - An investor might shrug off grim reading on the job market, the services sector manufacturing or as an anomaly, but two starts to feel like a trend. With fears of a recession at their highest level yet, Wall Street expects this week, the economic reports did not turn the doomsayers remaining optimistic.

Monday, the Institute for Supply Management of the United States reports on the manufacturing sector in February - most analysts expect a contraction after a modest rise in January and contraction in December. They also expect to see another decline in the gauge Wednesday February ISM activity in the service sector, following a sharp drop in January.

Contraction manufacturing in December was the first since January 2007, and the service sector of the recent contraction was the first in nearly five years.

Perhaps more significant for Wall Street, however, will be Friday, February jobs report. On average, economists foresee a slight increase in wages, but many believe they will decrease for a second consecutive month. Last month, the Ministry of Labour has revealed that there was a loss of net new jobs created in January - the first in nearly four years.

It is possible, the government may revise the data from January after learning through other research that jobs actually increased during the same month. Several months ago, the Department of Labor reported a net loss of jobs for the month of August, only to revise it until a month later.

But the market is not betting on it.

"We may be another loss of jobs," said Alfred E. Goldman, chief market strategist at AG Edwards & Sons Inc. In St. Louis. "And that would certainly confirm, in my opinion, is that the recession on our doorstep.

A recession is usually defined by two straight quarters of declining gross domestic production, the largest gauge of the health of the economy. A poll released last week by the National Association for Business Economics showed that 45% of economists predict a recession in 2008.

"The consumer has a tough row to hoe," said Goldman, pointing to higher energy costs, lower house prices and swelling debt. "If they are safe in their jobs, they continue to spend, but with the flexibility of the labour market, spending will continue to contract."

Usually, rates of delinquency and default consumer loans correlated with the unemployment rate, but this time, the problems of defence and credit weakness of the job market. So now, investors are wondering, what will the job market difficult, and how much worse could America's debt troubles get a result?

The problems at the consumer level have a direct effect on when the financial centers of the world will bounce back from their recent struggles: rising loan defaults mean more losses.

"With brokers and banks unable to capital, credit is a growing," said Jane Caron, chief economic strategist at Dwight Asset Management. "If nonagricultural payrolls begin to decline, the trend ... Which will worsen the prospects of the value of these products structured finance."

As jitters on the bond insurers continues to slam the market, the largest insurer - American International Group (AIG, Fortune 500) - dealt with the stock market a blow last Friday, revealing its largest quarterly loss ever. AIG has lost $ 5.3 billion in the fourth quarter, mainly because of contracts known as credit default swaps, which are committed to cover debt repayment missed.

After rising earlier in the week and then tumbling, the Dow Jones industrial average finished the week down 0.9%. The Standard & Poor's 500 fell 1.7%, and the Nasdaq composite index lost 1.4%.

The Dow is above the low it hit at the end of January, but many market strategists believe that it could return to those levels before it launches a recovery.
Dollar: It will only get worse

Apart from better than expected economic data, the words of appeasement of the Fed officials scheduled to speak this week - and any good news on the front line of companies - could help to keep stocks afloat. But market observers do not expect the volatility of letting up soon.

"Investors are very concerned about the quality of the balance sheets of banks and brokers, hedge funds and some blowups," says Caron. "That will continue to keep investors gun-shy, and not only in the coming week, but coming months."

Some major brokerages are scheduled to post their quarterly results later in March, but most financial companies do not release their salary until April. Companies reporting earnings this week include retailers BJ's Wholesale Club (BJ, Fortune 500), Costco Wholesale Corp.. (COST, Fortune 500)., Saks Inc. (SKS) and Staples Inc. (SPLS, Fortune 500), which should give investors a taste of how consumers spend their money. To the top