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MARKET PREVIEW: Investors eye Fed

Investors will be on Federal Reserve watch Monday as the last batch of economic data pours in before Fed Chairman Alan Greenspan decides whether to cut interest rates again. The Dow is set to open slightly lower.

Monday's economic data will be the last clues the Federal Reserve will take into consideration before its meeting Tuesday. Investors will be trying to determine if the Fed will make a 50-basis-point cut to interest rates, which is what most analysts have been predicting.

The day's first economic news will be business inventories for March, due about an hour before the markets open. Economists expect inventories will have fallen by 0.2 percent, the same rate as in February.

A report on industrial production and capacity use for April is also due out before the opening bell. The figure is expected to have fallen 0.2 percent, compared with a 0.4 percent gain in March; capacity use is predicted to have dropped to 79.1 percent from 79.4 percent.

Stocks to Watch

  • AT&T (NYSE: T) filed Friday its preliminary proposal to seek shareholder approval to break into four separately traded companies in a move to foster new growth and increase flexibility.

    AT&T also explained in the filing how its debt would be divided among the four units, but did not say who would manage each unit, or which one AT&T Chairman C. Michael Armstrong would lead.

    Under the plan, AT&T's four businesses will each operating under the "AT&T" brand, and shareholders will hold stock in each of the four companies once the breakup is complete. The four units are wireless; broadband, the cable TV and broadband services provider; the business unit, an enterprise communications and networking provider; and the consumer unit, a consumer communications provider.

    Once the proxy filing is finalized, AT&T shareholders will be asked to vote at a special meeting in late summer or early fall. AT&T's regular annual meeting is scheduled to be held May 23.

  • British Telecommunications' (NYSE: BTY) potential venture with AT&T will also grab some attention Monday. The Wall Street Journal has reported that the companies are exploring whether to form a separately listed global-telecom company.

    Combining these units is one of several options laid out in a prospectus to be distributed to BT shareholders this week, the paper said, citing people familiar with the matter. Other options, including the sale of BT's stake in the loss-making Concert, also are contained in the prospectus. The rights issue was announced last week as part of a reorganization of BT designed to reduce the company's huge debt, and coincides with the appointment of a new chairman, Sir Christopher Bland.

    At the Bell

    The Dow Jones industrial average may open 33 points lower. The Standard & Poor's 500 index for June futures contracts was off 3.8 points to 1248 at 7:15 a.m. EDT in 24-hour electronic trading.

    Reuters contributed to this report.