Investors will be treated to a slew of economic reports in the week ahead, and the news is expected to be very good. But analysts are divided about how the market will react.
After some encouraging data recently, including a 7% jump in third-quarter gross domestic product, analysts are hopeful that the coming week's numbers will be strong.
"Boy, if we're not getting some good economic reports now, we're in trouble," said Jim Melcher, president and market strategist at Balestra Capital. "We've just gotten through the most stimulative phase of fiscal and monetary policy that we've ever seen in this country."
Still, some pundits argue that investors have already priced in the solid data, and with the market trading at the upper end of its recent trading range, they believe some consolidation might be in order.
A manufacturing report from the Institute for Supply Management is expected to be released on Monday, and preliminary productivity numbers for the third quarter are on tap for Thursday. But perhaps the most significant report will come Friday, with the release of the employment statistics for October.
Job growth has been the missing link of the recovery so far, and investors will be anxious to hear if the situation is improving. Economists believe 50,000 new jobs were added to the payroll last month, and they expect the jobless rate to hold steady at 6.1%.
"If it shows improvement, that's to be expected, but the question is, is it sufficient?" Melcher said. "Even if we were adding 100,000 new jobs a month, that's not enough, because we're not keeping up with new job applicants."
Even so, John Hughes, equity analyst at Shields & Co., thinks the jobs report could send stocks higher on Friday. "That may be the one catalyst that could get things going," he said.
Hughes doesn't believe other reports will have much impact because he said most of the news already has been factored in. Although stocks did go up this week, the gains were fairly muted, given the strength of the data, he said.
"If you actually see job growth, it may be convincing enough for investors to do some more buying," Hughes said. "If you don't get it, there's going to be a lot of concern."
Dow Jones Industrial Average
closed the week up by 218 points, or 2.3%, at 9801, while the
gained 22 points, or 2.1%, to 1051. The
jumped 67 points, or 3.6%, to 1932.
While investors will have to wait until the end of the week for clues about the job market, a slew of reports are due out before then. On Monday, construction spending data will be released, along with the ISM index. Economists expect the ISM to rise to 55.8 from 53.7 in September. Auto and truck sales are also on the docket for Monday.
Wednesday will bring factory orders and the ISM services index, and on Thursday, third-quarter productivity data and weekly unemployment claims are on tap. Economists believe that productivity surged 7.3% in the third quarter, after a 6.8% increase in the second quarter. Wholesale inventories and consumer credit are scheduled for Friday along with the jobs report.
"If the economic data continues in the same vein that we've seen over the last two weeks, the market is probably going to take a positive tone," said Art Hogan, chief market strategist at Jefferies.
The data for October will be interesting because they will give investors some idea of how the fourth quarter is shaping up. Analysts note that there is no more tax relief due in the current quarter, which could affect consumer spending. Still, the GDP report showed that other sectors of the economy have been picking up recently and that a broad-based recovery seems to be taking hold.
Hogan said he's also expecting to see more merger-and-acquisition activity in the week ahead. This week,
Bank of America
said it would buy
agreed to buy
( RJR) agreed to merge with
British American Tobacco
While most of the corporate earnings have now been reported, there are a few companies scheduled to release results next week.
is expected to report a 73-cent profit on Monday, and
is projected to earn 33 cents on Tuesday.
will chime in on Tuesday, and
( QCOMM) will report on Wednesday.
will release results Thursday.