NEW YORK (CNN/Money) -
Frustrated? You're not alone.
Lately, stock markets have been sticking to a range like your leg to a beach chair on a hot day.
Between higher oil prices, Iraq, interest rates and the presidential election, investors have had plenty to worry about.
So much so, that they've been digging their feet in, leaving the major indexes in essentially one big range for the last five months.
And while many analysts say the market will probably remain range-bound through the summer, due to lingering worries about all of the above, there are a few developments due in the next few weeks that could at least distract, if not inspire, the beached bull.
There are, of course, also seasonal tendencies at work affecting the markets.
- The Fed's policy meeting and the handoff in Iraq
Fed Funds futures contracts indicate traders are betting the Fed will raise rates 25 basis points, or a quarter-percentage point, when they meet June 29-30. But don't rule out a half-point hike, with futures suggesting a 54 percent expectation of that happening.
"If the Fed would raise rates by a half a point at this meeting, rather than 25 (basis) points, that might shake things up, but I really doubt that would happen," said Robert Mikkelsen, senior managing director of equity capital markets at Advest Inc.
June 30 also marks the day of the transition of power in Iraq in which the Coalition Provisional Authority and the Iraqi Governing Council -- both formed last November -- are to turn over power to a caretaker government. Elections for a permanent government are expected to take place in January of 2005.
The United Nations has said it will send officials to Iraq to help with the transfer of power and under a U.N. resolution, a multinational force will serve at the request of Iraq's government.
But that doesn't mean things will go smoothly. Tensions remain high amid the ongoing fighting, the Iraqi prisoner abuse scandal and the recent sabotage to the country's oil infrastructure.
At the very least, the handover may provide some relief for investors that the U.S. is pulling back from Iraq.
"The handover could spark some very short-term euphoria, but more likely we'll remain rangebound until there is some catalyst that really sends us out of this," said Timothy Ghriskey, chief investment officer at Solaris Asset Management.
- The June employment report
Due just two days after the Fed's decision and the transfer of power in Iraq, the June employment report may seem a bit anti-climactic. After all, by the time the Fed meets again, it will be August and another jobs report will be out.
Why it will be relevant is as further proof that the economy is recovering and that the labor market is back on track. Additionally, any worries about the Fed having raised rates a few days earlier will be soothed by a strong report.
The economy created nearly one million jobs in the period of March through May. Economists surveyed by Briefing.com expect employers added 240,000 new jobs to their payrolls after adding 248,000 jobs in April. The unemployment rate is expected to hold steady at 5.6 percent, where it's stayed for several months.
- 2nd quarter earnings, starting early July
For many analysts, the second-quarter earnings look like the best short-term catalyst for the market.
"Because inflation is modest, and worries about that are starting to diminish, I think the focus will turn to earnings, and the earnings are going to be very strong," said Michael Carty, a principal at New Millennium Advisors.
However, the strong earnings may not necessarily inspire a stock market rally. First-quarter earnings were also extremely strong, with many companies boosting guidance, but that didn't have a big impact on a market preoccupied with other macro issues.
There's no official kick-off or party for the quarterly earnings reporting "season," but for many market participants, the ball drops when Alcoa (AA: Research, Estimates), always the first Dow 30 member to report, reveals its results.
Alcoa is due to report July 7, after the market close. The company is expected to have earned 48 cents per share, according to Thomson/First Call estimates, up from 27 cents a year earlier.
Overall, second-quarter earnings are expected to be smashing. While third and fourth quarter results may show milder gains versus the year-earlier period, the second-quarter earnings are expected to show close to as strong a rise as the first-quarter earnings did.
And analysts' expectations for the second-quarter earnings have been rising. In February, 2Q earnings for the S&P 500 were expected to rise just under 14 percent versus a year earlier, whereas now, estimates are just under 20 percent, according to Thomson/First Call. When you factor in actual earnings, which trend higher than expected earnings, Thomson/First Call estimates a year-over-year earnings rise of around 25 percent to 26 percent.
- Democratic convention, July 26-29
While no one is worried about Dennis Kucinich, or any other candidates who haven't officially dropped out of the race pulling a sudden upset, the confirmation of Senator John Kerry's nomination sets the presidential election campaign fully in motion.
Many articles have documented the fact that in a general sense, Wall Street prefers Republicans, due to the perception of that party pushing more big business-friendly policies. Equally well documented is the fact that historically, stocks have tended to perform better under Democrats.
Regardless of which party might be better for Wall Street in 2005, the year of an election tends to be good for stocks in general, as the party in power tends to do what it can to keep the economy moving, and consumers happy, so it will stay in power.
Unfortunately, election year July's tend to be the second worst month of the year for the Nasdaq, with an average drop of 1.1 percent between 1971 and 2003, according to the Stock Trader's Almanac. (Non-election year Julys are pretty lousy, too, with the composite scoring an average drop of 0.4 percent, starting off its stretch of the worst four months of the year).
On the upside, the second-half usually brings an inflow of retirement funds.
Besides, the symbolic move toward the November elections that the Democratic National Convention provides will at least give the market something new to chew over.
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