Wall Street: A critical crossroad
The last full week of the first quarter is key as investors try to puzzle out whether the two-week rally is kismet or kaput.
NEW YORK (CNNMoney.com) -- The last full week in the quarter is a critical one for investors as they look for reasons to either resurrect the stalled rally or retreat even further.
"As we approach the end of the quarter the big question is if we can push the S&P 500 above the 800 level," said Michael Sheldon, chief market strategist at RDM Financial Group.
He said that if the market can make that move, it would add weight to bets that the much longed for bear market bottom was put in place earlier in March.
"We need another leg up on decent (trading) volume before more buyers will come in off the sidelines," Sheldon said. "Unless something changes, you have to consider the current advance a rally in the bear market, but you never know."
Key economic reports are due this week on home sales and income and spending, while in Washington, Congress talks AIG and regulatory reform. But more notable will be if Wall Street is able to recharge the advance after it lost steam at the end of last week.
After plunging 28% to 12-year lows, the S&P 500 shot back up rapidly, gaining 17% in seven sessions. But stocks slipped at the end of last week, as investors bailed out of banks and techs, the leaders of the advance. Still, Wall Street was able to post a second week of gains, its best streak in 10 months.
In the week ahead, investors will get a better sense if those 12-year lows marked a significant floor, or if they were just a resting point on a bigger trek down. Twice late last week, the S&P 500 topped the 800 level, only to turn tail and run.
Looking for stability: Stocks have benefited lately from a few encouraging signs, including better-than-expected reports on housing starts and retail sales and comments from Citigroup and a few other banks that they were profitable in the first two months of the year.
Also, regulators talked about reinstating the "uptick rule" that limits short selling - and changing mark-to-market accounting, which might help put a value on some of the bad assets on bank balance sheets.
Although investors have taken a pretty subdued response to many of the government's initiatives to pump money into the system, last week's announcement from the Fed seemed to provide some encouragement.
On Wednesday, the Federal Reserve said it is buying $300 billion in long-term bonds over the next six months as part of a larger initiative to put $1 trillion into the economy and get credit flowing again.
"I think the Fed's move was very aggressive and will be very important going forward," said Richard Campagna, chief investment officer at brokerage 300 North Capital.
Monday: Existing home sales are expected to have fallen to a seasonally adjusted 4.45 million unit rate in February from a 4.49 million unit rate in January, according to a consensus of economists surveyed by Briefing.com.
Tuesday: The House Financial Services Committee holds a hearing on AIG, with both Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner due to speak. The hearing is due to begin at 10 a.m. ET.
At around the same time, the Senate Banking Committee holds a hearing on ways to modernize bank regulation. Federal Deposit Insurance Corp. Chairman Sheila Bair is among the speakers.
President Obama delivers a televised address during prime time.
Wednesday: New home sales are expected to have fallen to a seasonally-adjusted 300,000 unit rate from a 309,000 unit rate in January.
Durable goods orders for February are expected to have fallen 2% after falling 5.2% in the prior month. Durable goods orders excluding transportation are expected to have fallen 2% after falling 2.5% in January.
The government's weekly crude oil inventories report is also due in the morning.
Thursday: The House Financial Services Committee holds a hearing on regulatory reform, with Secretary Geithner due to testify.
The day's biggest economic report is the weekly jobless claims report. The number of Americans filing new claims for unemployment is expected to have risen to 650,000 from 646,000 the previous week. Continuing claims, a measure of people who have been receiving unemployment for a week or more, will also be in focus. Last week, continuing claims hit an all-time high of 5.473 million.
Thursday also brings the final reading on fourth-quarter gross domestic product, which is expected to have shrunk by a 6.6% annual rate versus the previous reading of a 6.2% rate. That 6.2% rate was a 26-year low.
Best Buy (BBY, Fortune 500) reports quarterly results before the start of trading. The electronics retailer is expected to have earned $1.38 versus $1.71 a year ago.
Homebuilder Lennar (LEN, Fortune 500) reports results after the close. The company is expected to report a loss of 64 cents versus a loss of 56 cents a year ago.
Friday: February personal income is expected to have fallen 0.1% after rising 0.4% in the previous month. Personal spending is expected to have rise 0.3% after rising 0.6% in the previous month.
The revised reading on consumer sentiment from the University of Michigan is also due.
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