Wall Street waits for economic data

With the earnings season in full swing, investors on Wall Street are waiting for some crucial economic developments this week that will point the way ahead for the US economy. The US Federal Reserve starts a two-day meeting in Washington today and tomorrow will give its decision on interest rates.

The central bank is widely expected to keep rates unchanged after Fed chairman Mr Alan Greenspan said last week that forces hindering an economic rebound were starting to abate. Later in the week the government will report fourth-quarter gross domestic product - almost certainly showing that the US economy slowed for the second quarter in succession - and the monthly unemployment figures.

Helped by low interest rates, the key US housing market remained resilient in December - and indeed throughout the whole of 2001 - despite the recession, a government report showed yesterday.

Single-family home sales jumped 5.7 per cent in December, exceeding expectations and setting a record for the year. A total of 900,000 new homes were sold during 2001, the highest figure since 1963. Sales of existing homes also set a record for 2001, with more than five million houses sold, the National Association of Realtors said.

Following Compaq Computer's unexpectedly upbeat forecast at the weekend, Xerox yesterday reported a surprise profit, before unusual items, for the 2001 fourth quarter, and said it was confident of a profit for the full year 2002 as well. Both US companies have substantial investments in Ireland.

Xerox posted a profit of 15 US cents per share excluding restructuring charges and currency effects, well above analysts' forecasts, and said it had returned to operational profitability. Chief executive Ms Anne Mulcahy credited the company's turnaround to recent decisions to exit certain businesses and cut costs, which "resulted in the strong performance delivered in the fourth quarter, including increased gross margins \ reduction of inventory to historically low levels, and improved receivables".

The Stamford, Connecticut-based company reported a net loss of $4 million (€4.6 million), or 1 US cent a share, compared with a loss of $20 million, or 4 cents a share, a year earlier. Fourth-quarter revenues were $4.3 billion, down 13 per cent from $4.9 billion a year earlier.

Compaq said it expected this year's earnings before charges to be higher than projected at around $580 million or 32 cents a share on flat revenue.

The Houston computer maker said this came from cutting back losses in its PC unit and increasing earnings in big computer and storage operations.

Compaq is engaged in a messy merger with Hewlett-Packard but said it still expected shareholders and regulators to back the union.