Investors Will Weigh Stream of Economic Data, Earnings for Clarity on Economy's Direction

NEW YORK (AP) -- Investors will begin the second week of the year hoping for more clarity about the direction of the economy, and in turn, the markets, after Wall Street's lackluster start to 2007.

A steady feed of economic data and a trickle of big earnings in the coming week might help the market find balance and pick a direction. Last week, Wall Street saw big shifts in momentum, rising first on news of strength in manufacturing, but stumbling amid concerns that the Federal Reserve might actually raise interest rates and not lower them, as some analysts had started to forecast.

Investors often like to talk about the early days of January setting a tone for the year, so it's understandable if some are feeling discouraged after last week's mixed performance. The Dow
Jones industrial average fell 0.52 percent and the Standard & Poor's 500 index fell 0.61 percent, while the Nasdaq composite index added 0.78 percent.

Investors have been trying to square their desire for the economy to slow with their hope that it not cool too quickly and risk spinning into recession. Wall Street wants growth to slow to force inflation lower and therefore draw the Fed into lowering short-term rates.

ECONOMIC DATA
On Monday, investors expect the Fed to release its consumer credit report for November. It is a sometimes volatile reading of consumer debt. On Tuesday, the International Council of Shopping Centers, a trade group, is expected to release a report on weekly chain-store sales.
Wednesday is expected to bring weekly crude inventory data. Oil prices have fallen sharply since the start of the year as unseasonably high temperatures in much of the country have hurt demand for home heating oil. The Commerce Department's report on the November trade deficit is also due.

Thursday brings weekly reports on jobless claims. Last week, investors frowned on a jobs report that showed strong hiring in December and that unemployment remained near a five-year low. Wall Street was concerned that a scarcity of workers would make it harder for businesses to hire and retain workers. Persistent wage inflation could make the Federal Reserve less likely to lower interest rates. The central bank, which remains vigilant about inflation, has left rates unchanged at its last four meetings after raising them 17 straight times before that.

Then, on Friday, investors expect figures from the Commerce Department on import and export prices for December. The data help illustrate what consumers pay for foreign-made goods.

Retail sales figures for December from the department will likely confirm what Wall Street already knows: The holiday season was a disappointment for most retailers.
Also due that day are Commerce Department reports on business sales and inventories.

EARNINGS
Alcoa kicks off the quarterly earnings season when it reports fourth-quarter results on Tuesday. The aluminum company is expected to be a litmus test for both analysts and economists to determine the pace of U.S. manufacturing.

The company, one of the 30 whose stocks make up the Dow, is expected to report an 88 percent rise in earnings per share -- to 66 cents from 35 cents -- according to analysts polled by Thomson Financial. Revenue is expected to hit $7.6 billion for the quarter.
Shares of the company closed at $28.76 on Friday and have traded between $26.39 and $36.96 in the past 52 weeks.

On Wednesday, biotechnology company Genentech Inc. is expected to report results of 55 cents per share compared with 34 cents a year earlier. Analysts expect the company to post $2.53 billion of revenue during the quarter. Shares closed at $83.68 Friday and have traded within a 52-week range of $75.58 and $94.46.

Apple Expected to Unveil Cell Phone or TV Set-Top Box This Week at Macworld Show

SAN FRANCISCO (AP) -- Technophiles are eagerly waiting to learn whether the king of digital music can colonize an entirely new category of consumer electronics.

Steve Jobs, chief executive of Apple Computer Inc., is expected to launch at least one revolutionary product Tuesday at the Macworld Conference & Expo in San Francisco. Speculation has focused mainly on an Apple-branded cellular phone and a set-top box that allows people to send video from their computers to their televisions.

Although Apple spokeswoman Natalie Kerris declined comment on "rumors and speculation," bloggers, enthusiasts and investors have been continually guessing whether Jobs will unveil a "smart phone" (which some are calling iPhone), iTV or both.

Apple's iPod music player wasn't the first on the market when it launched in 2001. But its sleek design and intuitive user interface quickly made it a hit.
Industry analysts believe another well-designed product from Apple could seriously threaten major tech companies such as Motorola Inc., Nokia Corp., Samsung Electronics Co., Verizon Wireless and TiVo Inc.

Expectations for Macworld are so lofty that a failure to launch an earth-shattering product this week could dent Apple's already volatile stock price, investors say. The stock has traded in a 52-week range of $50.16 to $93.16. It closed Friday at $85.05 on the Nasdaq Stock Market.
Wall Street's confidence in Apple has wavered slightly because of the possibility that improper handling of employee stock options would erase some of Apple's record profits. The scandal threatened to plunge Jobs into a legal morass, if not cost him his job.

Still, anticipation is so breathless in the blogosphere that some pundits have already credited Apple with changing the global telecommunications sector -- even though the iPhone is technically still "vaporware," or nonexistent.

The mere suggestion that Apple might make a glamorous, simple cell phone that downloads, plays and shares digital music has intimidated competitors, said Avi Greengart, an analyst with Current Analysis.

"Even if Apple does not announce a phone, just the threat of Apple's entry could spur innovation," Greengart wrote in a research note Thursday. "If Apple builds a phone that is easy and genuinely pleasurable to use, the company will have a winner no matter how it is priced or sold."

Apple also is expected to unveil a set-top box designed to bridge computers and television sets so users can more easily watch their downloaded movies on a big screen. The move would complement Apple's entry into online movies -- it began selling titles through its iTunes store in September.

As Apple launched online movies, Jobs showed off a gadget that streams high-definition videos, selling for $299 starting sometime in the first quarter. Analysts believe the demo was of the prerelease version of the iTV that could be introduced at Macworld, venue for many of Apple's monumental product launches over the years.

The demo, which looked like a flatter but wider version of the Mac Mini computer, worked with computers running Apple's Macintosh or Microsoft Corp.'s Windows systems and used Apple's iTunes software to manage multimedia files. A small hard drive was expected to be included with iTV.

The product could be as revolutionary to digital movies as the iPod was to digital music. Both devices would be seen as liberating media from the computer, allowing people to enjoy digital files without being chained to a desktop or laptop.

The iTV could generate millions of new customers -- not just iPod-wearing hipsters but garden variety couch potatoes and big spenders on home entertainment systems, said principal analyst Josh Bernoff of Cambridge, Mass.-based Forrester Research.

"There are a whole lot more people who watch TV than listen to digital music," Bernoff said. "This could be a great edge for Apple."

Apple needs a hit next week to keep employees focused on products, not scandal. But hype over iPhone and iTV has become so deafening on blogs and Web sites that disappointment may result, said Mike Gartenberg, research director of New York-based JupiterResearch.
"The key isn't whether Apple introduces a phone or new iPod or iTV but whether over time the company keeps launching new products that capture consumers' imaginations," Gartenberg said. "That's their continuing challenge going forward, and it's a tough one."

Ethanol Boom Divides Farmers and Ranchers As Demand for Fuel Drives Up Cost of Feed Corn

SALT LAKE CITY (AP) -- From corn fields to Wall Street, enthusiasm for ethanol is at an all-time high. But not everyone is enthusiastic.
Demand for the corn-based fuel is driving up the cost of feed corn, making it more expensive to feed cows, chickens and pigs.

"It's hard to see where the future is, if corn keeps going up," said Kerby Barker, a cattle rancher in southwestern Wyoming. "Anytime you jack up the price of fuel, anytime you jack up the price of corn, it just drives up our bottom line."
Long-term, it could drive up the cost of food, which is alarming to meat producers and food companies.
Like many ranchers, Barker questions the 51-cent-a-gallon tax credit created by Congress to encourage growth of the ethanol industry.

"The feeling in our area is that all the subsidies going to support ethanol production is really hurting livestock production," Barker said.

A potential split is in evidence this week during the annual meeting of the American Farm Bureau Federation this week in Salt Lake City. Farm Bureau is the country's largest general-interest agriculture group.

Its members still are trying to understand the consequences of the nation's rapid expansion of ethanol.
"We have a bull on the loose here, and it's going to have a lot of implications for American agriculture and our population," Keith Collins, the Agriculture Department's chief economist, told Farm Bureau members Sunday morning.

Enough plants are under construction or being expanded to more than double the nation's ethanol production, from around 5 billion gallons now to 11 billion gallons, according to industry estimates.
Production will probably keep expanding even if prices rise higher, Collins said. Prices have climbed above $3 a bushel, the highest level in more than a decade. Strong returns mean plants could cover costs even above $4 or $5 a bushel, depending on prices for ethanol byproducts, he said.

The ethanol boom has been good news for grain farmers and rural communities, where new plants are opening at a breakneck pace. While big agribusiness companies such as Archer Daniels Midland Co. and Cargill Inc. produce the most ethanol, many new plants are farmer-
owned cooperatives.

But the boom has put the squeeze on those who produce beef, chicken and pork.
While hog producers are expected to get prices this year that are similar to 2006, around $46 a hundredweight, they still won't break even. For that, prices would need to average $50 a hundredweight, said Ron Plain, an agriculture economist at the University of Missouri.

"The big thing is much, much bigger feed costs, and that will give us red ink, I'm afraid, in 2007 and 2008," Plain said.
High corn prices are affecting the margins for meat producers such as Smithfield Foods Inc. and Tyson Foods, which have seen earnings fall.

Eventually, sustained high corn prices will probably lead to higher grocery bills. If corn prices rise by $1 a bushel, within a couple of years, grocery shoppers should see the price of pork rise 3 percent to 3.5 percent, Collins said.
The demand for ethanol, however, doesn't mean there is less corn for people to eat -- field corn for livestock and fuel is different from sweet corn, the source of fresh corn on the cob and canned or frozen corn.

But food companies say the impact still goes beyond meat and milk. High prices prompt farmers to plant corn in place of other crops, such as wheat, driving up the price of things like wheat flour, said Cal Dooley, who heads the Food Products Association, an industry group.
"We wouldn't have a concern with this if this was strictly the result of market forces, but what is driving a lot of this use of corn for ethanol is a fairly generous subsidy for production of ethanol," Dooley said in an interview.

Not that the food companies he represents want to eliminate the subsidy, Dooley said. Rather, there is interest in tying the subsidy to market forces, raising it when prices are low and lowering it when prices are high, he said. The question is whether the industry has grown enough to survive without the subsidy, said Collins, the Agriculture Department economist. There have been periods in the past year where ethanol was profitable without the subsidy, and periods when it was not, he said.

"You could argue it's still in a critical period, with a huge amount of production under construction," Collins said.
That is what the industry and its supporters believe. While the subsidy expires in 2010, lawmakers introduced a bill last week that would make it permanent. The lawmakers are Reps. Earl Pomeroy, D-N.D., and Kenny Hulshof, R-Mo.

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