Stocks roadblocked by consumers
Wall Street's five-month rally hits the wall as confidence slides and the jobless rate keeps rising. Retail sales, housing, manufacturing in focus this week.
NEW YORK (CNNMoney.com) -- A rolling rally has hit something of an impasse of late as investors have stopped rewarding 'less bad' news and are now looking for clearer signs of an economic recovery.
The S&P 500 has risen 50% off of the March 9 lows as investors have watched the economy move out of crisis mode, thanks to the passage of time -- and to extraordinary monetary and fiscal stimulus. But that advance has left many investors in hunker-down-and-wait mode.
That was evident last week, when a fairly optimistic outlook from the Federal Reserve and Wall Street economists failed to lift stocks. The market posted losses for the first week in five, with lackluster retail sales and nervous consumers adding to worries about just how weak a recovery might be.
The week ahead keeps the concerns front and center, with reports on housing, unemployment and manufacturing due, along with profit reports from Home Depot and other retailers.
"We've seen some stability in the economic date and some cost-cutting from corporations, but we really need to see the recovery of the consumer," said Tim McCandless, senior equity analyst at Bel Air Investment Advisors.
Rally losing steam: Other than a brief 7% pullback between late June and early July, stocks have been in ongoing rally mode. But that's unlikely to continue.
"When a market goes up 50%, there has to be a selloff, and I think we'll see one of maybe 10% to 15% in the next month or two," said Ron Kiddoo, chief investment officer at Cozad Asset Management. "But I don't think we'll see it until the fall."
A fear of missing out on another leg up is likely to keep a lid on any major selling right now, he said.
However, the market could be very choppy. August tends to be light on volume and high on volatility. Last week brought the second slowest trading day of the year. The week ahead could be equally thinly traded.
Quarterly results: With 91% of the S&P 500 results having been released, second-quarter profits are expected to have fallen 28% versus a year ago, according to the latest figures from earnings tracker Thomson Reuters.
Reports have largely been better than expected, with 72% of reported earnings topping expectations versus the long-term average of 61%. In Thomson's 15 years of tracking results, only the first quarter of 2004 saw a bigger percentage of upside surprises.
But results have been driven by cost-cutting, and many companies have reported lower revenue. Looking out, the third quarter is expected to show continued weakness, with Thomson estimates showing a decline of around 20% versus the previous year.
A handful of retailers are due to report results this week, including rivals Lowe's (LOW, Fortune 500) and Home Depot (HD, Fortune 500), and also Target (TGT, Fortune 500). Computer maker Hewlett-Packard (HPQ, Fortune 500) is also set to release results. Both Home Depot and Hewlett Packard are Dow components.
Monday: Lowe's reports results before the start of trading. The retailer is expected to have earned 54 cents per share, according to a consensus of analysts surveyed by Thomson Reuters, versus 64 cents a year earlier.
The Empire Manufacturing survey for August is also due in the morning and is expected to show the hard-hit manufacturing sector is bottoming, at least in the New York area. The survey is expected to turn positive, rising to 2.20 from a reading of negative 0.55 in July.
Tuesday: Lowe's rival Home Depot reports results before the start of trading. The Dow component is expected to have earned 59 cents per share versus 71 cents a year ago.
Target is expected to report earnings of 66 cents per share versus 82 cents a year ago. The retailer is also due to release results before the start of trading.
Also in the morning, the Labor Department releases the Producer Price Index (PPI), a reading on wholesale inflation. PPI is expected to have fallen 0.2% after rising 1.8% in June. So-called core PPI, which strips out volatile food and energy prices, is expected to have risen 0.1% after rising 0.5% in June.
July housing starts and building permits are due from the Commerce Department shortly after the start of trading. Housing starts are expected to have risen to a 598,000 unit annual rate from a 582,000 unit annualized rate in June. Building permits, a measure of builder confidence, are expected to have risen to a 576,000 unit annualized rate from a 570,000 unit annual rate in June.
After the close Tuesday, tech bellwether and Dow component Hewlett-Packard is expected to say it earned 90 cents per share, versus 86 cents a year ago.
Wednesday: The weekly oil inventories report from the Energy Information Administration is due in the morning.
Thursday: The weekly jobless claims report from the Labor Department is due in the morning. Economists expect that the numbers of Americans filing for jobless claims will fall to 553,000 from 558,000 in the previous week.
The July index of leading economic indicators (LEI) is due from the Conference Board shortly before the start of trading. LEI is expected to have risen 0.6% after rising 0.7% in June.
The Philadelphia Fed index, a regional reading on manufacturing, is expected to improve to negative 2 in August from negative 7.5 in July. Any reading that is negative implies weakness in the sector.
Friday: July existing home sales are expected to have risen to a 5.0 million unit annualized rate from a 4.98 million unit annualized rate in June. The report from the National Association of Realtors is due shortly after the start of trading.
The Labor Department releases the state-by-state employment reports for July in the morning. In June, the unemployment rate topped 10% in 15 states and the District of Columbia, with Michigan hit the hardest. Its 15.2% unemployment rate was the highest for any state in 25 years.
Federal Reserve Chairman Ben Bernanke will speak at the Kansas City Fed's economic symposium in Jackson Hole, Wyo., starting at 10 a.m. ET. His topic will be "reflections on a year of crisis." 
