NEW YORK (CNN/Money) -
Remember when good news was good news? Or that other happy time when bad news was good news too?
Lately, for Wall Street, all news seems to be bad news. Microsoft (MSFT: Research, Estimates) gives away $75 billion? Great! Microsoft reports a mildly disappointing profit? Too bad. Either way, stocks sell off.
Fed Chairman Alan Greenspan is exuberant about the economy? Great! The Maestro warns interest rates could rise quickly? Too bad. Either way, stocks sell off.
That was the way things ran last week, anyway. Nothing horrible happened, particularly, and some good things even happened, but the broader indices continued to drill slowly southward, posting their fourth straight losing week. The Dow Jones industrial average lost 1.75 percent, the Nasdaq gave up 1.8 percent, and the S&P 500 fell 1.4 percent. [For info on the coming week's key events, click here.]
This week again will bring plenty of news, with a ton of fairly interesting economic reports and 147 members of the S&P 500 reporting quarterly earnings, making this the second-busiest week in the second-quarter reporting season. [For a look at this week's earnings that matter, click here.]
Meanwhile, on Monday, the Democratic National Convention in Boston will begin, lasting through Thursday. Though largely kabuki theater -- Massachusetts Senator John Kerry is almost certain to be the party's nominee for president -- Wall Street denizens will still find plenty to worry about. As if the potential for a terror attack at the convention weren't bad enough, many on Wall Street are Republican-friendly and will grumble if Kerry has a good convention and gets a bounce in the polls.
Meanwhile, oil prices continue to bubble over $40 a barrel, with little relief in sight. Higher energy prices were often blamed for sluggish economic growth in June, and some Wall Streeters worry that continued petrol pain could cause similar headaches in July and beyond.
Seen any reason for stocks to trade higher yet? Neither have many analysts.
"There's no news, nothing I see on the immediate horizon, next week, that would shake the market out of its current malaise or end the summer doldrums," said Hugh Johnson, chief investment officer at First Albany. "There are so many things to worry about, and investors are therefore sitting on their hands, not making any new, major commitments."
What's to worry about?
First, there's that election. Unfortunately, for Wall Street, which wants all its answers yesterday, the race is neck-and-neck and probably won't be decided until November, barring unforeseen, dramatic developments.
Meanwhile, growth in the economy and corporate earnings is expected to slow down in the second half, and even strong second-quarter earnings reports haven't exactly set Wall Street on fire with cheer.
There have been signs that inflation is slowly gathering strength, and the Fed is widely expected to raise interest rates again, probably more than once, this year.
Throw in the higher oil prices and the lingering uncertainty about terrorism, and you have a potent nervous-making smorgasbord.
"My guess would be that the market's going to be somewhat trendless and friendless next week, just as it has been this week," Johnson said.
Technical bounce?
If there's any good news in all of this, it's the fact that the major stock indices have fallen to key support levels. For example, the Dow has dropped below 10,000, while the S&P 500 closed last week perilously close to 1,080, roughly the level at which traders have in the past been unable to resist rushing in and picking up bargains.
If that pattern holds true again, then traders could give the market a technical bounce.
"I would hope that the market will try to rally here, and bounce off these key support levels," said Jon Brorson, managing director of growth equities at Neuberger Berman. "If it doesn't bounce real quick in this area, we could have some real problems."
But Brorson and other analysts still note that, despite four down weeks, there's still just enough bullishness in the market to keep traders from capitulating, from panicking and triggering the kind of healthy sell-off that gives traders a real reason to jump back in.
Perhaps this is because many analysts and investors still believe that the future is quite bright; that, once some catalyst comes along -- significantly lower oil prices, say, or the end of the election season -- stocks will resume the 2003 bull market.
Others, however, fear the malaise could continue for some time, with price/earnings ratios on most stocks still historically high and the economy moving into a period of higher interest rates and inflation.
"It takes a long time, but because of inflation, world terror and a more stop-and-go business cycle, we think P/E multiples will be in a slow eroding phase," said Brorson. "That means the market will be more of a cyclical trading market than a sustainable bull market, meaning you've got to buy when things look cheap and sell when they look expensive."
Key events in the week ahead:
- On Monday, the Democratic National Convention in Boston begins. Sens. Kerry of Massachusetts and John Edwards of North Carolina will likely be nominated as presidential and vice-presidential candidates, respectively. Wall Street generally believes Republicans are more business-friendly and may be unhappy if Kerry gets a post-convention bounce in the polls -- though stocks have historically performed better under Democrats.
- Monday morning, the National Association of Realtors reports on sales of pre-owned homes -- the biggest part of the housing market -- in June. Economists, on average, believe sales slowed to an annualized rate of 6.67 million units from a 6.8-million-unit pace in May, according to Briefing.com.
- Monday afternoon, Kansas City Fed President Thomas Hoenig is scheduled to speak in Denver about monetary policy. Hoenig is a voting member of the Fed's policy-making committee.
- Tuesday morning, the Conference Board, a private research firm for business interests, releases its closely watched survey of consumer confidence in July. Economists, on average, believe confidence rose to 102 from 101.9 in June.
- Also Tuesday morning, the Census Bureau releases its figures for new home sales in June. Economists believe sales fell to an annualized rate of 1.275 million units from 1.369 million units in May.
- Wednesday morning, the Commerce Department reports on orders for durable manufactured goods in June. Part of this report, orders for non-defense capital goods excluding aircraft, is seen as a proxy for business spending. Economists think orders rose 1.5 percent after falling 1.6 percent in May.
- Thursday morning, the Labor Department releases its weekly report of new claims for unemployment benefits in the week ended July 23. Claims dropped to 339,000 in the prior week and have been bouncing around a lot, likely affected by auto-plant closings and other seasonal factors.
- Also Thursday morning, the Bureau of Labor Statistics will release its Employment Cost Index for the second quarter. This measure of labor costs usually gets little attention on Wall Street, but it will likely be watched closely for signs of inflation. Economists expect the ECI to rise 0.9 percent after rising 1.1 percent in the first quarter.
- Later Thursday morning, the Conference Board will release its Help Wanted Index, which measures newspaper help-wanted ads, for June. Economists believe the index rose to 40 from 39 in May.
- Friday morning, the Commerce Department releases its first (of many) estimate of second-quarter gross domestic product (GDP), the broadest measure of the economy. Economists believe it slowed to a 3.7 percent annual rate in the quarter from 3.9 percent in the first quarter.
- Later Friday morning, the University of Michigan will release its revised reading of consumer sentiment in July. Economists expect the measure to rise to 96.2 from an initial reading of 96.
- Also Friday morning, the NAPM-Chicago will release its index of business activity in the Chicago region in July. Economists expect the index to rise to 60 from 56.4 in June.
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