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NEW YORK (CNN/Money) -
Since hitting six-month lows in October, stocks have been on something of a tear. Analysts say that barring unforeseen circumstances, the week ahead should give investors a chance to build on that advance.
"We're entering a seasonal period now, pre-Thanksgiving, pre-December holidays, where we often see a stock advance," said William Hummer, principal at money manager Wayne Hummer Inc. (For more on why stocks often rally in November, click here.)
"I think the likelihood of gaining is reinforced this year because we've gotten to an oversold condition due to all the negatives that have weighed on stock investors," Hummer added, citing the hurricanes, surging energy prices and other challenges of the fall.
He doesn't expect a big runup, but thinks it's reasonable to see a modest advance in the short term.
The Dow and the S&P 500 have bounced back for two weeks now, and the Nasdaq composite for three. Some of that recovery has been technical, with stocks bouncing after the six-month lows. Yet, the market has also managed to recover lately due to certain persistent worries beginning to diminish.
After topping out above the $70 a barrel level at the end of August, crude oil is back at around the $60 a barrel level now, even briefly falling to $59. The level is still high enough to cause concern, but is well off its highs, providing reassurance to the market.
In addition, as the recent preliminary gross domestic product (GDP) growth report made clear, the economy seems to have held up in the third quarter, even amid the impact of the higher energy prices and the hurricanes.
Last week's mild payrolls report notwithstanding, "it's amazing that the economy has held up as well as it has," said Ram Kolluri, chief investment officer at GlobalValue Investors.
"The only big curve ball I see through the end of the year will be the somewhat lackluster Christmas sales that retailers are looking for," Kolluri added. "Unfortunately, the impact of higher heating bills on sales is going to be felt."
The economic calendar next week is pretty light, with the September trade balance and a slew of Fed speakers likely to garner the most attention. (For a preview, click here)
Dell, Cisco to report
With nearly three-fourths of the S&P 500 having already reported earnings, the number of big name corporations left is pretty small.
But next week does bring its fair share of market movers, including tech bellwethers Dell and Cisco Systems, as well as Pixar, Target and others. (For a preview, click here)
Third-quarter earnings are currently on track to rise roughly 15 percent from a year ago, according to Thomson Financial/First Call. The figure blends reported earnings and expected earnings.
While there's some lack of clarity about the strength of fourth-quarter and 2006 earnings, in general, the perception seems to be that the earnings have held up pretty well this year. That's a factor that the analysts say should continue supporting stocks in the short term.
"The third quarter earnings have been fairly well received and I think there will be anticipation that fourth-quarter earnings could be better than expected," Hummer added.
Next week's earnings
- Tuesday a.m.: Blockbuster (Research) is expected to report a loss of 15 cents per share, according to analysts surveyed by First Call. The video chain reported a profit of 2 cents a year ago; EchoStar (Research) is expected to have earned 47 cents per share, versus 22 cents a year ago.
- Tuesday p.m.: Pixar (Research) is expected to have earned 11 cents per share, versus 19 cents a year ago.
- Wednesday a.m.: Federated Department Stores (Research) is expected to report earnings of 22 cents per share, versus 42 cents a year ago.
- Wednesday p.m.: Cisco Systems (Research) is expected to have earned 24 cents per share, versus 21 cents a year ago; JDS Uniphase (Research) is expected to report a loss of a penny a share, the same as it did a year ago.
- Thursday a.m.: Target (Research) is expected to have earned 43 cents per share, versus 37 cents a year ago.
- Thursday p.m.: Dell (Research) is expected to have earned 39 cents per share, versus 33 cents a year ago;
Key events in the week ahead
- September wholesale inventories, due Wednesday, likely rose 0.4 percent, according to a consensus of economists surveyed by Briefing.com. Inventories rose 0.5 percent in August.
- The September trade balance, due Thursday, is expected to have widened to $61.0 billion from $59.0 billion in August.
- The preliminary November consumer sentiment index from the University of Michigan, due Thursday, is expected to have risen to 76.5 from 74.2 in October.
- Fed speakers during the week include two voting members of the FOMC. Governor Mark Olson speaks at a fair lending conference in Virginia on Tuesday; Philadelphia Fed president Anthony Santomero speaks on the economy on Wednesday.
- On Friday, the banks and the bond market will be closed for Veteran's Day, however, stock markets will be open.
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