With uncertainty lingering about the strength of a recovery in the economy and in corporate profits, along with continuing turmoil in the Middle East, investors could be on edge in the coming week.
Nevertheless, after a recent pullback, the major indices might be ready to head north if enough positive news comes out, strategists believe.
The first-quarter reporting season is coming into focus, with a handful of major companies scheduled to report next week, but there's still enough time for corporate America to work in a few more warnings.
"The focus from here on out is what's the first quarter going to look like," said Peter Boockvar, equity strategist at Miller Tabak. "People feel more comfortable that companies are riding this out, but that doesn't mean we're out of the woods. The recovery is looking more gradual than a month ago."
A string of software companies lowered their earnings guidance last week, including
Check Point Software
, as well as smaller software outfits
, putting pressure on stocks in the sector and raising concerns about the strength of a rebound in information technology spending.
Major companies on this week's earnings calendar include health care products maker
and biotech outfit
. Internet portal
and payment services firm
will also report, along with networking outfit
and Internet software company
So far, this confessional season has been one of
the most benign in more than a year, but that doesn't mean investors will get great first-quarter numbers, Boockvar said.
Always the first of the
Dow Jones Industrial Average components to report quarterly earnings, aluminum giant
reported first-quarter earnings Friday,
meeting estimates but expressing some caution about the rest of the year. "The near-term operating climate remains challenging, and we continue to focus on managing what is in our control," CEO Alain Belda said in a press release.
The economic calendar is relatively light in the coming week, but recent data has clouded the economic picture somewhat, so investors will keep a close watch on the monthly
retail sales report and the latest
consumer sentiment data. Both are due Friday and should provide clues to the consumer's spending stamina. Along with the retail sales data, the bulk of the nation's
chain stores are expected to release their March results on Thursday.
With some economists expecting the
Federal Reserve to
raise interest rates as soon as May, a key measure of inflation, the
producer price index, will also be on Wall Street's radar.
"There's been a little doubt put into the market with regard to recovery," said Paul Kasriel, chief U.S. economist at Northern Trust, citing a drift up in continuing jobless claims, a slowdown in refinancing activity and the
rise in oil prices. "Not that we are not in recovery, but the main doubt is just how quickly the Fed is going to respond."
Economists say weekly chain-store sales reports suggest that retail sales, excluding autos, were relatively flat in March. On average, economists are calling for a 0.5% increase in retail sales, compared with a 0.3% increase in February. Excluding autos, economists are expecting a 0.4% gain, vs. a 0.2% increase in February. Anything much stronger increases the chances of a rate hike in May.
Meanwhile, despite a rise in energy prices, political strife in the Middle East and a slight pullback in the equities market over the past three weeks, consumer confidence is expected to rise in a preliminary April reading. Consensus forecasts call for 97.3, up from 95.7 in March.
The producer price index, also due Friday, measures the cost of goods received by domestic producers of commodities in all stages of processing. Economists are expecting the headline number to jump to 0.6% from 0.2% in February. The core reading, which excludes food and energy, is seen as rising to 0.1%.