With the national elections and a
meeting behind it, the markets will be looking ahead next week for signs of improvement in the fundamental outlook.
"The market is searching for the next catalyst," said Brian Pears, a trader at Victory Capital Management, adding that exogenous events, such as the election victories that restored the Senate to Republican Party hands, are not enough to carry a rally.
Stocks finished the week mixed, with the
Dow Jones Industrial Average
closing up a modest 19 points, or 0.2%, at 8537.06, the
nudging down 1.4 points, or 0.1%, to 1359.4, and the
finishing lower 6.2 points, or 0.7%, to 894.74.
Since a market low on Oct. 9, the Dow is up 17%, the Nasdaq is higher by 22%, and the S&P is ahead 15%. The indices rallied before the Federal Reserve's decision on interest rates Wednesday, as investors bet on the likelihood of a 12th cut. Their wagers proved accurate, but have yet to really pay off.
The Dow, Nasdaq, and S&P finished below their highest levels of the week. Perhaps the rate cut was a reminder of the weak economy, with joblessness creeping up and confidence at a nine-year low.
"People are still concerned about the intensity of a turnaround in the economy. Not to mention, corporate profits have not really picked up," said Jim Volk, head of institutional trading at D.A. Davidson. "The punch line is that the markets are going to drift until we get some more direction."
In the coming week, retailers
May Deptartment Stores
Abercrombie & Fitch
will report earnings.
Last week, same-store sales reports at several retailers, Abercrombie & Fitch, J.C. Penney, and Federated, among them, came in better than expected for October, driven by purchases of winter outerwear. The results prompted the apparel sellers to raise upcoming earnings estimates.
The retail outlook, as we head into the crucial holiday shopping season, is still weak, however. "While results were strong compared to lowered expectations early in the month, we remain wary of the effects that the shorter holiday selling season,
Thanksgiving falls late this year, historically low consumer confidence levels, the
West Coast dock strike, and shifting traffic to off-mall formats could have on specialty names," said Brian Tunick, an analyst at J.P. Morgan, who covers teen retailer Abercrombie & Fitch, as well as
Many Americans still worry about a possible war in the Middle East. On Friday, the United Nations approved a resolution to give Iraq another last chance to surrender weapons of mass destruction. Subsequently, President Bush said Saddam Hussein would face "severe consequences" if he fails to comply. The threat of a military conflict is likely to hang over consumers over the next two months.
On Wednesday, the Commerce Department will release monthly retail sales figures for October. They are forecast to fall 0.1% after a 1.2% decline in September, due to a drop-off in vehicle sales. Excluding autos, retail sales are predicted to be up 0.2% after a 0.1% gain in the previous month.
"The effects of zero-percent financing are wearing off," said Kenneth Kim, an economist at Stone & McCarthy Research. "There is little pent-up demand for autos among consumers who bought so many."
Elsewhere, the Federal Reserve will release figures on Friday for industrial production, a measure of the output at factories, which is expected to decrease for the third month in a row in October.