NEW YORK (CNN/Money) -
With the presidential election over with, the labor market starting to pick up and third-quarter earnings nearly all reported, stock markets have cleared a number of big hurdles.
The focus now returns to economics and market fundamentals, analysts say. Technicians think the major gauges may be set up for some small, but sustained gains through the end of the year.
But that's not without hiccups, of course.
Concerns about terrorism and the war in Iraq have not disappeared. Oil prices have retreated from all-time highs, but remain near $50 a barrel. The dollar fell to an all-time low versus the euro Friday. December brings the start of the fourth-quarter pre-announcement period and a whole new set of economic numbers.
But for the next week or two, things are looking better.
November and December are traditionally among the best months of the year for stocks and plenty of investors have been waiting on the sidelines until the election was over to put some money to work.
President Bush's re-election and the fact that the election passed without major incident comforted investors worried about a deadlock similar to 2000. A strong November payrolls report pushed stocks to new yearly highs Friday, with the S&P 500 at a 2-1/2 year high.
But the market could be the victim of its own success in the short term, suffering some profit taking, particularly in light of this week's expected interest rate hike.
"We've gone up nine days in a row," said Donald Selkin, director of research at Joseph Stevens. "I think we're probably in for a brief pullback next week, probably in response to the Fed statement."
The Federal Open Market Committee meets Wednesday to discuss monetary policy and is expected to release its decision around 2:15 p.m. ET. Economists are expecting the central bank to boost rates by a quarter-percentage point from 1.75 percent to 2 percent.
"I think everyone pretty much thinks they're going to raise by 25 basis points," said David Briggs, head of equity trading at Federated Investors. "So far, the rate hikes haven't really hurt the eocnomy, so I don't think people are particularly intimidated by the prospect of next week's rise."
In addition, investors will be looking closely at the Fed statement to get a sense of the future of monetary policy.
"The wording of the statement will be important, and then you've also got Cisco and Dell reporting next week," Selkin said, noting that expectations are positive for both companies.
In addition to tech titans Cisco Systems (Research) and Dell (Research), a few retailers are due to report results this week, including Target (Research), Abercrombie & Fitch (Research), Starbucks (Research) and Tiffany & Co. (Research).
Around 90 percent of the S&P 500 has reported third-quarter earnings. Growth from the same 2003 quarter stands at about 16 percent, according to S&P.
That's good, but a decline from the recent run of four back-to-back quarters of more than 20 percent year-over-year growth.
Key events next week
- The wholesale inventories report, due Tuesday, is expected to show a gain of 0.7 percent in September, according to Briefing.com estimates. Inventories rose 0.9 percent in August.
- Cisco Systems reports earnings after the close Tuesday. The tech bellwether is expected to have earned 21 cents per share, according to Thomson/First Call estimates, four cents more than a year earlier.
- Dell reports earnings late Thursday. The PC-maker is expected to have earned 33 cents per share, according to Thomson/First Call estimates. That would be up from 26 cents a year ago.
- September business inventories data are due early Friday. Inventories are seen having risen 0.5 percent after rising 0.7 percent in August.
- October retail sales data are also due early Friday. Sales are expected to have climbed 0.1 percent after rising 1.5 percent in September. Sales excluding autos are expected to have risen 0.5 percent, after rising 0.6 percent in September.
- The University of Michigan's first read on consumer sentiment for November is due after the start of trading Friday. The sentiment index is forecast to increase to 93 from 91.7 in October.
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