Softly as in a Morning Sunrise; Could the Market Be Flashing a Sell Signal?; The Xbox Generation Won't Play the 401(k) Game

Softly as in a Morning Sunrise

If you're waiting for the new Federal Reserve Board chairman, Ben Bernanke, to sound the all-clear on interest-rate hikes, don't hold your breath. It's not that Bernanke necessarily plans to keep raising rates. But he's the new kid on the block. The man who replaced Fed Chairman Alan Greenspan in February has to sound like an aggressive inflation fighter, whether or not he intends to boost rates again. That's all part of the dance between the Fed and Wall Street. "For the Fed to imply that it would be stopping soon would be tantamount to giving a green light for robust growth," says Stuart Schweitzer, global markets strategist for J. P. Morgan Asset & Wealth Management. And that would create real inflation fears on Wall Street. This explains why the central bank hinted that more rate hikes could be on the way shortly after it lifted rates last week. Some traders misunderstood the Fed's remarks and sold off on the news, fearing a more hawkish stance. But even if the Fed keeps rates where they are, or boosts rates just once more, it's not going to issue a press release saying "No mas."

Could the Market Be Flashing a Sell Signal?

The stock market is off to a rip-roaring start. In the just-ended first quarter, the Standard & Poor's 500 index of blue-chip stocks jumped about 4 percent. That's nearly as much as the S&P returned in all of 2005. Small-company stocks and foreign shares did even better. Despite the encouraging start, this may not be a good time to put too much new money to work. That's because stocks tend to run in cycles. And Year 2 of a presidential term has historically been a tough one. What's more, the second and third quarters of these second years have been the worst time to be in the market. According to S&P research, stocks have lost 2 percent or more on average in the second and third quarters of the second years of a presidential cycle. This is based on data going back to 1945. So if history is any guide, this may be a good time to adhere to that old adage: Sell in May and go away.

The Xbox Generation Won't Play the 401(k) Game

While the vast majority of young workers understand they're on their own when it comes to funding retirement, most aren't doing a thing about it. According to a recent study by the benefits consultants Hewitt Associates, less than 1 in 3 workers 18 to 25 who are eligible to participate in company-sponsored 401(k) plans is taking advantage of the retirement accounts. By comparison, 63 percent of generation X workers and 72 percent of baby boomers are saving and investing in these tax-deferred plans. "Clearly, this is a challenging group to get thinking about their futures," says Lori Lucas, Hewitt's director of retirement research. Yet studies show that money invested in your 20s is far more valuable than money set aside in your 40s or 50s--all because of the power of compound interest.

Job Juggernaut; How Goes Housing?

Job Juggernaut

How many new jobs can the economy produce before inflation becomes a real problem? That's the big question. In February, the economy grew fast enough to produce a better-than-expected 243,000 new nonfarm payroll jobs. That was among the largest monthly tallies since Hurricane Katrina. Economists worry that big job gains send prices higher. But over the past 12 months, average hourly wages have grown at a slightly slower pace than inflation. This week, the Labor Department will release its March jobs report. Economists are forecasting that around 200,000 new jobs were created last month. If true--and wage growth remains under control--the markets should take the news in stride. But if well over 200,000 jobs were created, the inflation hawks will be out en masse.

How Goes Housing?

Existing-home sales jumped 5.2 percent in February. But new-home sales tumbled 10.5 percent. So which figure more accurately reflects the health of the housing market? The answer should become clearer this week when the National Association of Realtors reveals the latest results of its pending home sales index.