With most of the market-moving economic news out of the way, investors will likely turn their attention to earnings preannouncements next week and a
policy meeting on Tuesday.
Although analysts aren't expecting a change in interest rates, the central bank's policy statement will once again be closely scrutinized, particularly in light of some poor data on the labor market recently.
Fed officials have said they intend to keep rates low for a long period of time, even though the economy is slated to grow 4.5% in the third quarter. Fed Chief Alan Greenspan and others have questioned the sustainability of the economic recovery, citing job losses and deflation as key concerns.
Peter Cardillo, chief market strategist at Global Partners Securities, said he is expecting the market to drift lower next week, but largely because of worries about the upcoming earnings season.
"The real question as we approach the end of the third quarter will be the earnings," he said. "That could cause the markets to have a bit of indigestion, given that we're at high levels."
So far, third-quarter preannouncements have been less negative than usual, according to Thomson First Call. The ratio of negative preannouncements to positive ones currently stands at 1.7, compared with 2.1 in the equivalent period in the second quarter and 2.2 in the third quarter of last year.
Still, analysts say that even mildly disappointing news could prompt a big selloff because so much good news has already been priced in. Even though
raised its profit outlook on Tuesday, the stock still fell more than 6% after it said a recovery had not yet materialized. Meanwhile,
said its fiscal first-quarter earnings matched expectations, but it missed revenue estimates, sending the stock down 3%.
Several companies are due to report earnings next week, including homebuilders
on Tuesday and retailers
are on the docket for Thursday.
Results from the homebuilders and retailers will give some idea of how consumer spending has been holding up in such a sluggish job market. On Friday, consumer sentiment slipped and retail sales for August rose at a slower pace than expected.
Frank Gretz, a technical analyst at Shields & Co., said he is expecting a pullback next week because he feels stocks are looking "tired."
"The market has had a good run and may be in for some sloppy action for a week or two," he said. Gretz is concerned that the
, which broke out of a summer-long trading range in the past couple of weeks, might be moving back into that range again. "Generally speaking, you don't like to see stocks or market averages pull back into a trading range once you've broken out," he said.
While most of the economic data due out next week are considered second tier, they could have some impact on trade.
Business inventories are on tap for Monday along with the current account balance, New York Empire State index, industrial production and capacity industrialization.
Those reports will be followed by the consumer price index on Tuesday and housing starts on Wednesday. Thursday will bring the leading economic indicators, the Philadelphia Federal Reserve survey and Federal Open Market Committee minutes from the August policy meeting.
Stocks ended slightly lower this week as troubling economic news, valuation concerns, analyst downgrades and the discovery of a tape purportedly made by terrorist Osama bin Laden all weighed on the market. The
Dow Jones Industrial Average
ended the week down 0.3% at 9371, while the
fell 0.2% to 1858. The S&P 500 lost 0.3% to 1018.