After running up to new highs for the year, some analysts would like to see the major averages take a breather next week. Whether that will happen, of course, remains to be seen.
rose to a 17-month high last week while the
broke out of summer-long trading ranges to reach their best levels in over a year. Ed Peters, chief investment strategist at PanAgora Asset Management, said it would probably be healthy for stocks to pull back a little over the near term.
"The market has run up an awful lot and has gotten ahead of itself," he said. "I think we'll trade flat to down next week."
To be sure, there won't be a lot of news for investors to get excited about in the week ahead. Corporate earnings will be scarce and most of the significant economic data will come on Friday.
Still, some analysts say there's plenty of momentum left in the market and the path of least resistance continues to be up. "We're not expecting much in the way of a pullback," said Richard Dickson, a technical analyst at Lowry Research. "I wouldn't be surprised to see a bounce next week."
Despite the recent gains, Dickson said he isn't seeing any signs of excess in the market. Although there are high levels of bullishness, which can be considered a contrarian indicator, sentiment data isn't useful when it comes to timing the market, he said.
Meanwhile, volume, momentum indicators and net advancers and declines are all confirming the highs in the major indices, he said. "There really isn't anything you can point to that says this is a danger signal, watch out, the market's getting ready to roll over."
Ozan Akcin, chief market strategist at Puglisi & Co., is also bullish, saying it would take a "huge news event" to turn the tide. One reason stocks moved higher this week, he said, was because of some positive guidance from the likes of
. If third-quarter preannouncements continue to be upbeat next week, that could help fuel the rally, he said.
Preannouncements have come in strong so far. And on Friday, Merrill Lynch chief economist David Rosenberg raised his 2003 S&P earnings projections by $1.50 to $52.50. He also boosted 2004 estimates by $2 to $58.
Among economic reports to watch out for next week are consumer credit on Monday and the producer price index and retail sales on Friday. Analysts are currently calling for consumer debt to rise by $5 billion in July after an unexpected $400 million drop in June. A rise in debt would show that consumers are still willing to borrow -- and by extension spend -- while a fall in consumer credit could signal that the consumer is getting tired, particularly after seven months of job losses.
Wholesale inventories are slated for Tuesday, followed by unemployment claims, import and export prices and the trade balance on Thursday. On Friday, analysts expect the PPI to rise 0.3% after a 0.1% increase in July. The core rate, which excludes food and energy, is expected to be up 0.1%. Retail sales, a sign of consumer spending, are forecast to rise 0.9%, or 0.7% excluding autos.
The University of Michigan consumer sentiment survey for early September is also due for release Friday. Analysts are calling for a reading of 92 after hitting 89.3 in August. "There's been a big shift to the consumer and what will happen in light of today's very weak jobless data," Akcin said.
Some analysts say investors can expect to hear more chatter next week about the
meeting on Sept. 16. While few economists are calling for another rate cut, Friday's poor employment numbers and several speeches from Federal Reserve officials have indicated that another cut isn't out of the question at some point in the future.
Fed Governor Ben Bernanke said in a speech Thursday that "growth that is generated solely by increased productivity, and that is unaccompanied by substantial employment growth, may possibly require monetary ease, rather than monetary tightening, in the short run."