NEW YORK (CNN/Money) -
Wall Street had better have a nice, relaxing weekend, because it'll have its work cut out for it this week, juggling a wide variety of economic, corporate and political news.
Last week, stocks were batted back and forth by oil prices, corporate dramas, end-of-quarter portfolio shuffling, the first presidential debate and more. But on balance, the Dow Jones industrial average gained 1.5 percent, the Nasdaq jumped 3 percent and the Standard & Poor's 500 rose about 2 percent. [For a list of the coming week's key events, click here.]
Many observers were encouraged by the market's behavior last week. After all, stocks managed to rise, even though the economic news was mixed, Wall Street's favorite presidential candidate, President Bush, seemed to lose his first debate with the Democratic challenger, Sen. John Kerry, and the price of a barrel of crude oil closed above $50 a barrel for the first time ever.
Some analysts think investors are finally brushing aside some of the worries that have kept stocks in the doldrums for several months, including terrorism fears and election uncertainty, and are seeing rock-solid fundamentals for continued economic growth and corporate earnings.
"That's what's probably bringing the market around," said William Hummer, principal and market strategist at Wayne Hummer in Chicago. "Low interest rates and sustained growth will bring estimates that corporate earnings over the coming year could very well be up 8 or 9 percent. That will sustain the market for the coming months, until year-end."
The problem, however, is that Wall Street may have missed its chance to really celebrate strong economic and earnings growth this year, with another solid surge to new highs that would have extended the bull market that began in late 2002.
Corporate profits grew at a 20-percent-plus clip on a year-over-year basis for four straight quarters, a pace that will likely end in the third quarter. Meanwhile, the economy also grew at a healthy pace in the first half, and probably gained a little steam in the third quarter, but could decelerate again in the fourth quarter and into 2005.
While all this has been going on, stocks have been in a slow, downward spiral from a peak early in the year, with the Dow falling 6 percent and the Nasdaq falling nearly 10 percent.
"By the time everybody comes to their senses and says, 'We've been way too conservative,' they will realize that now's about the time for a defensive stance anyway," said Ozan Akcin, chief market strategist with Puglisi & Co. "It's frustrating for us because we've been pro-market, pro-cyclical bulls since the end of 2002 and for most of this year, but market sentiment was held back by the terror situation, oil prices and a host of other things."
Akcin does believe that strong corporate earnings could give the market a small bump after the election -- assuming Wall Street knows by Thanksgiving who the next president will be -- but that the bump will likely be short and short-lived.
"Now, the party is winding down," he said.
What to watch, what to watch?
Can Wall Street keep the party going this week? That depends on the news -- and there will be a lot of news.
The coming week brings third-quarter earnings reports from two Dow components, with Alcoa (AA: Research, Estimates) due to report after the closing bell Thursday and General Electric (GE: Research, Estimates) reporting Friday morning. Though most analysts think the quarter will be another good one for earnings, some companies could pick this week to give early warnings about worse-than-expected earnings, giving traders more news to chew on.
"The stock market has an opportunity to break upwards if corporate CEOs and CFOs say some good things, or at least some neutral things, about the outlook," said John Augustine, chief investment strategist at Fifth Third Asset Management.
The election will be in focus again, with a debate Tuesday night between Vice President Dick Cheney and Kerry's running mate, Sen. John Edwards. Tuesday night will also mark the start of baseball's postseason, giving TiVo-less Wall Streeters yet another reason to agonize.
A Friday-night debate between Bush and Kerry will come too late to affect the market, but could lead to some trepidation in Friday trading.
Meanwhile, lest anybody forget about who really runs the U.S. economy, Fed Chairman Alan Greenspan and a host of other Fed speakers will fan out across the country to deliver their views on the economy, inflation and interest rates.
Finally, on Friday comes the biggest economic news of the month, the Labor Department's report on payroll growth and unemployment in September. Not surprisingly, Wall Street economists, on average, expect September's labor market to look almost identical to that of August. They've been wrong about the labor market many times in the past year or so, and the odds are extremely high that they'll be wrong again -- in one direction or another.
And always, bubbling in the background, will be the threat of continuing violence in Iraq, record-high oil prices, surging home heating oil costs and more of the kinds of headaches that have dogged markets all year.
"Many market observers are coming out with the belief that the market will break upward after the election," Augustine said. "Such strong consensus views often don't turn out to be a reality."
Key events in the week ahead:
- Monday morning brings the Commerce Department's report on orders for goods made in U.S. factories in August. Economists, on average, expect orders to rise 0.1 percent after gaining 1.3 percent in July, according to Briefing.com.
- Later Monday morning, St. Louis Fed President William Poole, a voting member of the Fed's policy committee, will speak about the economic outlook.
- On Tuesday morning, Fed Chairman Alan Greenspan is scheduled to speak at the American Banker's Association in New York.
- Later Tuesday morning, the Institute for Supply Management releases its index of non-manufacturing activity in September. Economists expect the index to rise to 59 from 58.2 in August.
- Tuesday evening, the vice presidential candidates will debate in Cleveland.
- Wednesday afternoon, St. Louis Fed President Poole will again speak about the economic outlook, and Kansas City Fed President Thomas Hoenig will speak about monetary policy.
- Thursday morning, the Labor Department releases the number of new claims for unemployment benefits in the week ending Oct. 2. Economists expect claims to slip to 350,000 from 369,000 the prior week.
- At noon on Thursday, Fed Governor Ben Bernanke speaks at the Japan Society in New York.
- Greenspan speaks again Thursday afternoon, giving opening remarks to the St. Louis Fed conference.
- Later Thursday afternoon, Dallas Fed President Robert McTeer will speak about the economic outlook.
- Friday morning, the Bureau of Labor Statistics reports on unemployment and non-farm payroll growth in September. The jobless rate is expected to hold steady at 5.4 percent, while economists, on average, think 140,000 new jobs were created, compared with 144,000 in September.
- Later Friday morning, Fed Vice Chairman Roger Ferguson speaks on a panel at the St. Louis Fed conference.
- Friday night, President Bush and Sen. John Kerry will debate again in St. Louis.
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