The market is likely to get more evidence of weakness in next week's economic and earnings reports. But some wonder if bad news -- and there has been no shortage of it -- is priced into stocks.
Last Tuesday, the
plunged to its worst level in six years, amid a slew of earnings warnings. For the week, the tech-heavy index closed down 22 points, or 1.8%, at 1199.1. The
Dow Jones Industrial Average
, which came dangerously near to closing under its July low, ended off 285 points, or 3.6%, at 7701, while the
fell 18 points, or 2.1%, to 827.4.
"I think the market is getting to levels where investors may feel comfortable again," said Michael O'Hare, a trader at Lehman Brothers. "If we stay in a trading range, people may feel more confident." Technically, O'Hare believes that the Dow should stay between 7500 and 8000 in the coming days.
"If we can get through preannouncement season over the next couple of weeks, I think the latest lows put in will hold for the rest of the year," said Tom Schrader, a trader at Legg Mason.
The breadth of last week's earnings warnings may fail to engender a buying spirit, however. Among firms to warn were
, which affirmed its results, talked about tough economic conditions.
Economic uncertainty, as evidenced over the past week, remains a huge threat for the market.
Next week, economists forecast a weaker number on the Chicago purchasing managers index. It is expected to come in at 53 in September, down from 54.9. A reading above 50 confirms expansion in the factory sector. But a drop raises concerns about the weakest area of the economy in the last recession.
A national index of purchasing manager behavior is expected to tick up to 51 from 50.5 on Tuesday.
Looming large on next week's calendar will be the jobs report for September, to be released on Friday. It is expected to go a ways toward shaping expectations for the
meeting in November. At its last gathering, the central bank raised uncertainty about employment as a key issue.
Forecasts for the employment report vary, with the consensus calling for the addition of 15,000 jobs in September, down from 39,000 in August and for the unemployment rate to edge up to 5.9% from 5.7%.
"The labor market is weakening," said Paul Kasriel, an economist at Northern Trust. "Businesses are in no position to hire. There is still a lot of capacity in certain sectors, which is having a negative effect."
Overall, few economists expect to derive optimism about the economic recovery from next week's reports. "I think the best we will be able to say is that the economy is stabilizing," said Sung Won Sohn, chief economist at Wells Fargo. "It is neither falling into a recession nor recovering very fast."
Among companies that are scheduled to report earnings next week are
Pepsi Bottling Group
Research In Motion