The markets could see more rangebound trading next week, analysts said, with no obvious catalysts to ignite buying or selling. Topping a light economic calendar are monthly housing start numbers and the Philadelphia Fed survey.
Stocks ended up moderately last week on the back of better-than-expected economic data and optimism from some tech outfits. The
rose 41.1 points, or 0.5%, to 8578.3, while the
gained 52 points, or 3.8%, to 1411, and the
added 15 points, or 1.7%, to 909.74.
The market is coming off very solid gains in October. Since a low on Oct. 9, the Dow is up 18%, the Nasdaq is ahead 27%, and the S&P is higher by 17%. While most experts believe that the bottom is going to hold for the year, they do not see much reason for major buying or selling in the meantime.
"Investors are reluctant to take the market much higher, but they do not want to sell convincingly either," said Ray Hawkins, a trader at J.P. Morgan, who added that consolidation may be healthy.
Many Americans continue to be on edge about the possibility of a war. The market got a shot in the arm last week when Iraq agreed to terms of a U.N. resolution for unconditional weapons inspections. But after the initial jolt, stocks settled down to the realization that a military conflict may be inevitable.
"Until the specter of Iraq is gone, the market won't take off," said Todd Leone, a trader at SG Cowen.
Uncertainty about the economic outlook may further constrain the market's near-term performance. Last week,
Chairman Alan Greenspan said the economy has hit a "soft patch," due to weak capital spending, a decline in stock values, corporate malfeasance and geopolitical risk. But he said that already accommodative monetary policy would be enough to help work through it.
Elsewhere, retail sales, excluding autos, for October came in better than expected last week, giving investors some encouragement consumer spending will hold up ahead of the holiday shopping season. "Things were looking disastrous a couple of weeks ago," said Ted Wieseman, an economist at Morgan Stanley. "It may still be a weak Christmas. But now we are a little more optimistic."
Next week, retailers
will report results.
On Wednesday, the National Association of Homebuilders will release housing starts numbers for October. They are expected to decline slightly to 1.72 million from a record of 1.84 million in September.
The housing market, a bulwark in the latest economic downturn, has been a topic of debate on Wall Street. Some say that the decline in mortgage rates to record low levels will enable its strength to persist. "I do not think you will see a major correction without some other precipitating event," said Wieseman.
In the coming week, home improvement retailers
will post earnings.
Meanwhile, the Philadelphia Fed's survey of manufacturing activity will be released on Thursday. The index is expected to show some improvement in November after a weak reading in October.
"The fact that we are seeing some indications that the worst is over for the economy is giving us some optimism going into next year," said Wieseman. "But we will have to keep watching the data."