Investors will be looking to economic indicators next week for confirmation that stocks' two-month rally can last. Most watched will be the Institute for Supply Management's manufacturing index and the jobs report.
For the eighth week in a row, the
Dow Jones Industrial Average
closed up last week, gaining 90.43 points, or 1%, to 8895.27. It was the first eight-week streak since 1998. The
ended higher as well, the seventh time in eight weeks.
"There is definitely a solid trend in place over the last two months," said Ben Hovermale, head trader at Wells Capital Management. "Going into the end of the year, you have people that need to make their performance numbers. If someone is 15% to 20% in cash, they cannot afford to miss a rally like this."
Since October, the Dow is up 20.5%, the Nasdaq is higher 22% and the S&P 500 is ahead 33%.
"The market has good momentum lately," said Robert Competiello, a trader at Salomon Smith Barney, but he added that it could be vulnerable to some healthy profit-taking at these levels.
Traders attributed last week's gains largely to economic data, such as consumer sentiment, GDP, durable goods orders and weekly initial jobless claims.
"I think you will continue to see a somewhat better tone to the numbers," said Ethan Harris, an economist at Lehman Brothers, adding that gloomy forecasts for the economy have not been right.
On Monday, the ISM's manufacturing index is likely to grab the market's attention. A consensus of economists, according to
, is forecasting the index will tick up a point to 49.5. That would put it a half-point below levels indicating expansion in the factory sector.
Three regional manufacturing indices, the Empire State index, Philadelphia Fed survey and Chicago PMI, have all had strong readings in November, suggesting improvement on the national level.
Elsewhere, automakers will post monthly sales numbers on Tuesday. They are expected to edge higher to 5.5 million vehicles in November from 5.3 million vehicles in October, when the end of certain dealer financing incentives led to a decreased rate of spending on cars.
Two backward-looking economic releases, third-quarter productivity numbers and factory orders for October, will be reported Wednesday. Both are expected to show healthy increases.
The nation's retailers on Thursday will report weekly chain-store sales results that will capture the beginning of the crucial holiday shopping period. The reports will be watched carefully, amid some negative signs of slow mall traffic and an abundance of sales and markdowns at retailers.
On Friday, the Labor Department will publish the employment report for November. Including payroll and unemployment rate data, it is considered the best single measure of the economy.
"If there is any informational content in the weekly initial jobless claims numbers -- which have seen a 9.2% cumulative decline since the end of September -- I would be looking for employment growth for the month of November," said John Lonski, an economist at Moody's Investor Service.
Nonfarm payroll growth is expected to rise to 13,000 in November after falling by 5,000 in October, according to
. The jobless rate, a lagging indicator, is forecast to 5.8% from 5.7%.
Among companies scheduled to report earnings in the coming week are
Analysts now expect 20% earnings growth for the S&P 500 in the fourth quarter. But those consensus forecasts, like the ones for the third quarter, are likely to be revised down.
"Starting in the second and third week in December, you will see earnings confessions," said Joseph Kalinowski, chief investment officer at Ehrenkrantz King Nussbaum. "That could pressure the market."