Investors Await Bear Report, Fed Meeting

Last week was a fitful one for Wall Street. After soaring early in the week on news that the Fed was taking new steps to try to end the near paralysis in the credit markets, stocks pulled back Friday on news that Bear Stearns had to be bailed out. The major indexes finished the week little changed. The Dow rose 0.48 percent, the Standard & Poor's 500 index slipped 0.40 percent, and the Nasdaq composite index ended flat.

The Fed said it will lend as much as $200 billion to banks and brokerages to try to create a market for mortgage-backed assets, which no one wants to buy right now.

However, the Fed's loan plan is only a temporary solution. "The banks will eventually recognize their losses," said Swiss Re chief U.S. economist Kurt Karl. "It will be a tough year for everybody except maybe those manufacturers exclusively devoted to exporting."

"It's hard to see how we're not going to have a recession," Karl said. "We could scrape by with a non-technical recession ... but it's pretty ugly."

The Fed is expected to take another step this week to help the economy on Tuesday, it holds a regularly scheduled meeting on interest rates. The Fed is going to have to make a big rate move and a powerful statement to reassure the markets, and most analysts expect at least a half-point reduction in the key fed funds rate, which now stands at 3 percent. Some believe the Fed will slash rates by a full point to 2 percent.

This week's economic data is expected to show more weakness in the economy but some easing in inflation pressures.

Economists surveyed by Thomson Financial/IFR anticipate the Commerce Department on Tuesday to report declines in February housing starts and building permits; the Labor Department on Tuesday to report a modest increase in February producer prices; and the Philadelphia Fed on Thursday to report another contraction in the region's business activity.

Meanwhile, credit card processor Visa Inc. is expected to launch what it anticipates to be the largest initial public offering in U.S. history.