Stocks: retreat or recharge?

NEW YORK (CNNMoney.com) -- As a profitable first quarter draws to a close, stocks are in a vulnerable position.

This week brings the focus to perhaps the most persistent worries for investors: unemployment, consumer spending and the strength of the economic rebound. Reports are due on personal income and spending, as well as the labor market.

There should be some good news. On Friday, the government's monthly jobs report is expected to show employers added 190,000 jobs to their payrolls in March. But the unemployment rate is expected to hold steady at 9.7%.

"An improvement in payrolls will be a positive for the market, but it's probably already been anticipated," said Dave Hinnenkamp, CEO at KDV Wealth Management.

He said there are a lot of questions about the outlook for the economy, in terms of what kind of impact the health care bill and the deficit will have longer term.

Also, investors are unclear as to whether the consumer can hold up and if it doesn't, whether business spending can fill the gap. Meanwhile, the first big wave of first-quarter earnings reports aren't due until mid-to-late April.

Hinnenkamp said that some of the choppiness in the stock market last week was due to AT&T (T, Fortune 500), Deere & Co. (DE, Fortune 500) and Caterpillar (CAT, Fortune 500) saying they'll take charges to prepare for additional costs due to the passage of the health care bill.

"Right now we have a pretty fairly valued market and it's going to take another big catalyst to get it moving forward again," he said.

Year-to-date, the Dow is up 4%, the S&P 500 is up 4.6% and the Nasdaq is up 5.6%.

But since bottoming at 12-year lows just over a year ago, the Dow has gained 66% and the S&P 500 has gained 72%. Since bottoming at a six-year low at the same time, the Nasdaq has gained 89%.

Rally hitting resistance: The Dow, S&P 500 and Nasdaq have risen for six of the past seven weeks, all touching 18-month highs. But a well-paced advance has slowed to a crawl recently.

"It feels awfully heavy right now and like the market might be getting ready for a pullback," said Rob Siewert, portfolio manager at Glenmede. "We're getting buffeted by what's happening in Europe with the sovereign debt issues and with what's happening in the U.S. with health care and the jobs market."

A government report Friday showed that GDP grew at a 5.6% annualized rate in the fourth quarter, slower than the initially reported 5.9%, but still strong.

However, that was driven largely by inventory rebuilding, therefore making the number look stronger than it really is, said Scott Armiger, portfolio manager at Christiana Bank & Trust Company. He said that the next few quarters of GDP will also seem stronger than they are as the bulk of the stimulus money kicks in.

Meanwhile, the tax burden and cost of doing business keep rising. In such an environment, stocks are likely to stall or retreat, he said.

"I think we'll see a pullback sooner rather than later," Armiger said. "We could see some selling through the spring and then it picks back up in the summer when the second-quarter earnings are released."

Monday: The February reading on personal income and spending is due before the start of trading.

The Commerce Department report is expected to show that income rose 0.1% in February, according to a consensus of economists surveyed by Briefing.com. Income rose 0.1% in January too. Spending is expected to have risen 0.3% in February following a rise of 0.5% in January.

The Core PCE deflator -- a key measure of inflation that is part of the spending report -- is expected to have risen 0.1% following a flat reading in January.

Passover begins at sundown.

Tuesday: The S&P/Case-Shiller 20-city home price index is expected to have fallen 0.5% in January versus a year earlier. In December, the index plunged 3.1% versus a year earlier.

The Consumer Confidence index from the Conference Board is expected to have risen to 49.0 in March from 46.0 in February, according to forecasts.

Wednesday: Payroll services firm ADP is expected to report that employers in the private sector added 40,000 jobs to their payrolls in March after cutting 20,000 in February.

Outplacement firm Challenger, Gray & Christmas releases its report on announced layoffs in March.

Also on tap, although often less market-moving: the Chicago PMI, a regional reading on manufacturing, and the weekly oil inventory report from the government.

Research in Motion (RIMM) reports quarterly earnings after the close of trade. The blackberry maker is expected to have earned $1.28 per share versus 90 cents a year ago.

Thursday: Weekly and continuing jobless claims are due in the morning.

February construction spending from the Census Bureau is due out after the start of trading. Spending is expected to have fallen 1% after falling 0.6% in January.

The Institute for Supply Management's manufacturing index, due out after the start of trading, is expected to have risen to 57.0 in March from 56.5 in February.

March auto and truck sales are also due throughout the day.

Friday: Stock markets are closed for Good Friday.

However, the government's big March jobs report is still due for release in the morning. The Department of Labor is expected to report that employers added 190,000 jobs to their payrolls in March, after cutting 36,000 in February.

The unemployment rate, generated by a separate survey, is expected to hold steady at 9.7%, unchanged from February.

Average hourly earnings are expected to have risen 0.2% after rising 0.1% in February.