NEW YORK (
) -- After another week of stocks caught in an aggressive game of tug of war amid European contagion fears and mixed U.S. economic data, market watchers expect that the struggle will continue in the coming week.
Thursday brought a temporary
reprieve from global economic recovery pessimism, but stocks lacked conviction Friday, and several market observers including Howard Present, president and chief executive of F-Squared Investments, said the market has him feeling bearish.
"The market is very vulnerable to any weak news right now," Present said. "But, at this point, it feels more like a difficult market than a double-dip recession."
Next week promises to feed the market's hunger for direction with a fresh load of macroeconomic data that spans housing, consumer and manufacturing sectors.
Mike Strauss, chief economist and market strategist at Commonfund, hopes that the influx of data will help investors focus on the economic differentials between the U.S. and Europe.
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"We'll probably see a sharp decline in the producer price index and maybe in the consumer price index, which is good, but it'll likely be very strong industrial and manufacturing readings that will help build confidence in the U.S. recovery."
The market gets a read on May import and export prices on Tuesday in addition to a look at June manufacturing activity in the New York region with the Empire Manufacturing survey. Economists are looking for mild growth with a reading of 19.9, up from 19.1.
The Department of Labor's closely watched producer price index, which tracks prices of goods at the wholesale level, will be released on Wednesday. Market watchers are projecting a 0.4% decline in May, which is wider than April's dip of 0.1%. Excluding volatile food and fuel prices, the core producer price index is slated to rise 0.1%, after growth of 0.2% in the previous month.
The construction industry will also come into focus with the Department of Commerce's reports on housing starts, which are expected to fall 2.5% in May to 655,000, and on building permits, which are slated to increase 7.4% to 655,000 in May, according to
Later in Wednesday's morning session, the
is expected to report an improvement in capacity utilization in May, while industrial production is likely to remain relatively unchanged. Economists anticipate utilization of 74.2%, after 73.7% in April, and production growth of 0.7%, after April's 0.8% uptick.
Thursday brings a heavy load of labor and inflation data with separate reports on weekly initial jobless claims and May consumer prices. At 8:30 a.m. EDT, the market will be looking for a decline in the number of new claims filed for jobless benefits in the week ended June 12, from the prior week's level of 456,000. Inflationary pressures, meanwhile, are expected to remain muted. Economists estimate that prices at the consumer level fell 0.1% in May after a similar decline last month. Excluding food and energy prices, the core consumer price index is slated to inch 0.1% higher, after remaining flat in April.
The week's macroeconomic releases will wrap up by midmorning Thursday with the Conference Board's leading indicators report for May and the Philadelphia Federal Reserve's report on manufacturing activity. Leading indicators are forecast to increase by 0.4% in May, after slipping by 0.1%. Manufacturing in the Philadelphia region, however, is expected to weaken in June with a reading of 17, compared with May's level of 21.4.
Although there aren't any economic reports scheduled for Friday, the session could be a volatile one on account of quadruple witching, or the simultaneous expiration of four different types of futures and options contracts.
"Now that we have the May/June numbers coming out, we're starting to see if it's a policy move or based on fundamentals. If it is policy, then once these policies end, then growth is at risk. If it's based on fundamentals, then that growth can build upon itself and help with the rebound," said Daniel Penrod, senior industry analyst at the California Credit League. Penrod is most eager to get weekly home purchase application data from the Mortgage Bankers' Association on Wednesday morning.
"We've seen the consumer ebb and flow and one of the biggest factors is the housing market. People aren't going to make such a large purchase until they're confident in their incomes and financial standing. Plus, if someone is purchasing a new home, then they'll have to buy things for the home, so that confidence will start to trickle into the retail sector."
"Housing starts will also be an interesting piece because that will tell us how confident builders are going forward. The real estate market has a bold effect on the economy in both directions," Penrod said.
Macroeconomic news aside, Europe will probably continue to have a significant impact on market moves next week.
"We absolutely believe that Europe is going to have a hangover, so to speak, for quite some time -- and not simply just the peripherals; it'll have to affect the core countries as well," said Sam Fraundorf, investment management president at Wilmington Trust, noting widening spreads on core countries like France. He said the challenge with the European crisis is that unlike previous Asian and Latin American crises where countries had the ability to print money, individual eurozone countries don't have that option. Additionally, EU member countries' individual economies are vastly different, making it harder to address the problem.
As far as the U.S. is concerned, Fraundorf sees some knock-on effects from Europe but nothing drastic enough to change his forecast for mild GDP growth.
"I am concerned now that if the market turns more pessimistic, then we can have a position where this retrenchment since the highs we saw in April could become more bearish, so my foot is hovering over the brake pedal a little -- but I think the coming weeks will give us a better indication of that."
-- Written by Melinda Peer in New York