As US Federal Reserve chairman Alan Greenspan prepares to report on the state of the US economy to the House of Representatives tomorrow, the Bush administration has begun to talk up the prospect of an early end to the downturn.
However, Applied Materials, the largest supplier of products and services to the global semiconductor industry gave the market an unpleasant jolt yesterday by forecasting that it would not see a rebound in the sector until the second half of 2002.
This dampened hopes that tech companies would see a recovery in the last quarter or early next year.
Applied Materials management said the Silicon Valley-based company was "entering the second phase of the slowdown", signalling a long delay before a recovery.
Immediately after the noon announcement the tech-heavy Nasdaq Composite Index began to fall for the first time in four days.
US Treasury Secretary, Mr Paul O'Neill, was upbeat about a speedy recovery during a television interview on Sunday evening.
He told CNN he was confident that refund checks due to be sent out next week to taxpayers would help boost the economy.
"With this stimulus coming at just exactly the right time, I have a lot of confidence that our economy is going to be OK," Mr O'Neill said.
The refunds of up to $600 (€702) per household would work with recent interest rate cuts to form an important economic lift, said Mr O'Neill.
The refunds are a key component of President George W Bush's $1.35 trillion tax cut over 10 years which started to take effect last month.
Mr Greenspan has cut interest rates six times since early January and financial markets will be looking for clues in the Fed chairman's testimony on monetary policy tomorrow to a possible further cut of 0.25 per cent next month, which would bring rates down to 3.5 per cent.
US Treasuries rose yesterday on expectations that the Fed would lower rates for the seventh time to boost the sagging economy.
A key factor for Mr Greenspan to consider is the slide in oil prices, which has helped eliminate the threat of inflation.
Oil prices could fall from $25 a week ago to $21-$22 a barrel in the coming months according to Organisation of Petroleum Exporting Countries (OPEC) deputy secretary general, Shokri Ghanem.
Oil markets have slumped due to a slowdown in US demand and the resumption of Iraqi exports after a five-week break. Oil drilling stocks fell 8.6 per cent yesterday and have dropped 39 per cent in three months as the prospect of a bonanza under President Bush's fuel exploration drive have faded in the face of Congressional opposition and an easing of the energy crisis.
Another indication for Mr Greenspan to consider is the stubbornly-high level of business inventories.
These held steady in May at $1,197.1 billion though sales rose for the first time since December, the Commerce Department reported yesterday.
The Dow Jones Industrial Average opened down yesterday as investors waited for major earnings reports from Intel today and IBM tomorrow, the most important among 1,500 companies due to report this week. Some 15 of the 30 components of the Dow Jones and 181 of the Standard & Poor's 500 companies are to report their results this week.
The most encouraging reports yesterday came from the banking industry.
Citigroup, the number one US financial services company, said its profits rose 13 per cent, buoyed by growth at its international consumer arm.
Bank of America profits fell 2 per cent, hampered by loan losses and slack trading results. Continental Airlines said profits sank more than 70 per cent.
