Geopolitical concerns once again will likely take center stage in the coming week, when Secretary of State Colin Powell is scheduled to speak before the U.N. Security Council about Iraq.
On Wednesday, Powell is expected to provide more evidence that Saddam Hussein has been hiding weapons of mass destruction.
"What Powell says before the United Nations is going to dictate next week's market completely," said Jay Meagrow, a trader at McDonald. "I do not expect much buying ahead of that speech."
In his State of the Union Address, President Bush last week said the U.S. would lead a coalition against Hussein if he does not disarm, noting that Iraq had recently tried to acquire bomb materials.
Last Monday, U.N. weapons chief Hans Blix said Iraq had failed to account for 6,500 chemical warfare bombs. He also said it did not comply with air surveillance or account for supplies of anthrax. Separately, Powell said he hopes for a peaceful solution, but that time is running out on inspections.
For the week, the
Dow Jones Industrial Average
fell 77 points, or 1%, to 8053, while the
lost 21 points, or 1.6%, to 1321. The
dropped 5.7 points, or 0.7%, to 855.70. Over that period, market volatility was high, a scenario many expect to continue.
"The market is going to be shaky until we get more certainty on the geopolitical situation," said Michael O'Hare, a trader at Lehman Brothers. "More than earnings, that is what is driving the market."
Fourth-quarter earnings season will begin to wind down next week, with
Electronic Data Systems
So far, two-thirds of the S&P 500 has posted fourth-quarter earnings. "The peak weeks of fourth-quarter reporting season are now squarely in the rearview mirror, and results are notable if only for the lack of distinction," said Joseph Kalinowski, chief investment officer of Ehrenkrantz King Nussbaum, in a research note. "Sure, S&P 500 earnings are exceeding expectations (they always do) by an average of 3%, but this is only slightly above the historical average of 2.7%, dating back to 1994."
In economic news, the employment report for January will capture the market's attention on Friday. Consensus estimates show payrolls rising by 50,000, according to
, after falling 101,000 in December. The unemployment rate is forecast to hold steady at 6%.
"The report will not overturn the view that the labor market remains sluggish," said Josh Feinman, an economist at Deutsche Asset Management. "It is not deteriorating or getting a whole lot better."
Among other data to be reported next week will be the Institute for Supply Management's manufacturing index on Monday. It is expected to tick down to 53 in January, according to
, from 54.7 in December. A reading above 50 is still consistent with expansion.
"The recovery is continuing," said Feinman. "But the geopolitical situation is holding it back."