Wall Street hopes to extend hot streak
Although many bulls are on the beach, stocks may continue their summer surge this week. But experts say more recovery evidence is needed to keep rally going.
NEW YORK (CNNMoney.com) -- Investors are hoping the surprisingly strong summer market rally will last at least one more week -- before any second-guessing in the fall kicks in.
"We saw a huge rebound at the end of last week and that will probably carry over," said Richard Hughes, co-president of Portfolio Management Consultants. "But the trading volume is going to be very light."
The S&P 500 has jumped just shy of 52% since hitting a 12-year low on March 9. Bets that the sky is not falling after all and the economy will recover - paired with generous fiscal and monetary stimulus - have boosted the market.
But the recent leg of the advance has been run on thin trading volume, even for summer. Low volume tends to exaggerate market moves.
"It won't be until September that we'll be able to really see how it settles," Hughes said. "The focus is shifting from wondering when the recession is going to end to wondering what a recovery is going to look like," he said.
Next week brings reports on personal income and spending, as well as home prices, all of which are important in the bigger discussion about how the consumer is holding up. A revision of second-quarter gross domestic product (GDP) is also on tap.
Confirming a recovery: Last week, Fed chief Ben Bernanke said the U.S. economy is nearing a recovery, although the pace will be slow as unemployment stays high.
Reports on housing and manufacturing showed surprising gains last week, while the closely-watched weekly jobless claims report showed more Americans filed for first-time benefits than economists were expecting. In the weeks ahead, Wall Street is going to be looking for more confirmation that a recovery is underway.
"Typically when you're moving from recession to expansion, you get numbers that conflict with each other, like the jobless claims," said David Chalupnik, head of equities at First American Funds. "That trend will continue."
He said that of greater interest in the weeks ahead will be "how quickly the economy makes the transition" into a period of expansion and whether the consumer starts spending again. Consumers have jumped into the government's soon-to-end Cash for Clunkers program, but have otherwise held back on non-essentials..
Monday: There are no market moving events on the schedule Monday.
Tuesday: The August consumer confidence index from the Conference Board is expected to have risen to 48.8 from 46.6 in July, according to a consensus of economists surveyed by Briefing.com.
The S&P/CaseShiller home price index, a measure of 20 major cities, is expected to have fallen 16.4% in June versus a year ago after falling 17.1% in May. If that estimate turns out to be accurate, it would be the third month in a row that the pace of declines has lessened.
In May, the report showed that home prices rose versus the previous month, the first monthly increase in almost 3 years.
Wednesday: New home sales are expected to have risen to an annualized rate of 390,000 in July from an annualized rate of 384,000 in June. The Commerce Department report is due after the start of trading.
July durable goods orders are expected to have risen 3.2% after falling 2.5% in June. Orders, excluding transportation, are expected to have risen 1% after rising 1.1% in June. The Commerce Department report is due in the morning.
The weekly crude oil inventories report from the Energy Information Administration is also due in the morning.
Thursday: Second-quarter gross domestic product growth (GDP) is expected to have contracted at a 1.4% annualized rate, worse than the initially reported 1% rate, but not as sharp as the 6.4% decline in the previous quarter. The Commerce Department report is due before the start of trading.
A report is also due in the morning on weekly jobless claims.
Toll Brothers (TOL) reports results in the morning. The homebuilder is expected to report a loss of $1.26 per share versus a loss of 18 cents a year ago, according to a consensus of analysts surveyed by Thomson Reuters.
Friday: The Commerce Department releases reports on July personal income and spending before the start of trading.
Income is expected to have risen 0.1% after falling 1.3% in June. Spending is expected to have risen 0.2% after rising 0.4% in June. The PCE Core deflator, the report's inflation component, is expected to have risen 0.1% after rising 0.2% in June.