Coming Week: High Hopes

After days filled with bullish sentiment and stock market highs, traders will spend much of the coming week waiting on news of the broadest measure of the economy -- first-quarter output, or GDP.

Part of what has helped the market recover from its late February mini-correction is traders' renewed embrace of the soft-landing scenario for the economy. After earlier worries about a subprime-borrower-driven meltdown, relief has washed over the market that liquidity remains ample, the job market is tight, and consumers and buyout titans are still spending.

The change of heart happened partly because of happy surprises.

Earnings have been unexpectedly good. The S&P 500 thus far is logging 5.2% year-over-year growth, compared with estimates for 3.3%, according to Thomson Financial. The March employment report was strong at 180,000 jobs added, compared with expectations for 135,000, and retail sales were surprisingly healthy. The trade deficit was smaller than expected, while housing starts and building permits turned up slightly.

But that doesn't mean that GDP, which is one of the stock market's biggest movers, will be back up to "trend" growth of over 3%. The Commerce Department's first estimate of the figure -- there are three total -- comes Friday, and the consensus of analysts puts growth at 1.8%.

IDEAglobal's Joe Brusuelas says the three estimates may take the opposite path from last quarter's string of reports. For the fourth quarter of 2006, the first estimate was 3.5%, while the final analysis revealed growth of only 2.5%.

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