Weekend Reading: Strategists Remain Cautiously Optimistic

Good Sunday morning. Here are some articles and papers worth reading. First, however, a look back at the week that just finished, and a look forward at the week ahead.

As expected, the major markets advanced last week. With the recent spate of hurricanes over, the markets could take a breather -- and they generally liked what they saw. The Dow and the S&P 500 gained 1.4% and 1.1%, respectively, while the Nasdaq added 1.6%. Click here for the weekly performance.

This week, we may see more of the same, if investors look past what will almost certainly be a spate of crummy releases. Most strategists are cautiously optimistic about the current quarter, despite high oil prices and a high reconstruction-driven deficit. Granted, those same analysts are worried about next year, with it looking increasingly likely that we are in for a rocky start to the year, if not a few quarters of the same. Nevertheless, people are remarkably upbeat about the balance of 2005.

While I don't disagree that some of the headwinds holding back the market in recent weeks have now let up, never underestimate the importance of a wall of worry in fueling the market's advance -- and that wall just became more like a small hedge.

Turning to the economic week ahead, next week will likely be nasty. We have September car and truck sales data coming out on Monday, plus factory orders, which are due Tuesday. The week closes with employment data, which will be watched closely. The unemployment rate is expected to come in at 5.0%, but it will almost certainly come in higher than that, with hurricane disruptions in Louisiana and Texas skewing the numbers.

Over on earnings, it is still quiet, but there are some companies worth watching. We have Yum! Brands (YUM Quote) (Wednesday), and ATI Technologies (ATYT Quote) and Costco (COST Quote) (Thursday).

Finally, here are some articles and papers worth reading:

Editor's note: To access some of these stories, registration or a subscription may be required. Please check the individual links for the site's policy.

• Newspaper stands by Iran oil-threat story (AP)
• Good (skeptical) analysis of micro-cap ETFs (NakedShorts)
• Five myths about oil prices (Fortune)
• Earnings growth expectations are increasing, which is bad for the market (The New York Times)
• China has sent warships to a disputed oil drilling area in the East China Sea (O&G Journal)
• The junk bond market shows signs of cracking (IDD)
• Rupert Murdoch is in a hurry to buy more Web traffic (BusinessWeek)
• Barron's tips Merrill Lynch, and low P/E stocks, but pans MBIA (Barron's)
• Managing other people's money remains a good way to get rich (Bloomberg)
• The hurricane impact on the U.S. economy will be brief, and will pale against reconstruction spending (IMF)
• Three questions for successful money management (Forbes/Fisher)
• New FDA deputy commissioner tries to alibi recent comments that Food and Drug Administration inaction is causing cancer deaths (Boston Globe)
• Harvard's chief investment officer turns in standout performance as he exits (The New York Times)
• Carl Icahn's tussle with Time-Warner looks set to become more combative (Time)
• Books: Kevin Starr's latest look at California gets positive reviews in the current Economist (Amazon/Economist)
• Research: In most U.S. cities there is no housing bubble (NBER)

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting