Stocks head into next week coming off their best Monday-to-Friday performance in more than 20 years. They'll be hard-pressed to sustain that kind of momentum, but the indices have confounded enough critics recently that anyone betting against them must prepare for the possibility of disappointment.
Sparking Friday's rally was optimism about military progress in Iraq. Stocks shot up more than 230 points after the U.S. began a major bombing campaign in Baghdad and unconfirmed rumors that Saddam Hussein died in Wednesday's missile attack. The rally capped a week in which the
rose 8.4%, its best one-week performance since October 1982. The
shot up 6%, or 81 points, to 1421. The
tacked on 7.4%, or 62 points, to 827.
Since its intraday low of two Wednesdays ago, the Dow is up 1,100 points, capping its first eight-day rally since December of 1998.
"The market is hovering over a peak as it priced in a perfect war. If this were to conclude over the weekend, positively or negatively, stocks could drop after having bid up for the past several sessions," said Dennis Jarrett, chief market analyst at Jarrett Investment Research.
Nick Curzio, senior portfolio manager at FXC Investors says "the market has gone overboard. Something negative could still happen, such as the loss of life or an act of terrorism. I expect more volatility this week."
But others are still betting on upward moves. While conceding there are risks involved after the run-up, Daniel Morgan, fund manager at Noble Financial Group, is still optimistic. "Now we'll be able to proceed without the uncertainty that was depressing stocks. We finally engaged in some action and it looks like it's going as planned." Morgan forecasts gains of 10% to 15% for the major indices this year.
Although geopolitical events will still take center stage, investors will get two indicators of how the consumer is interpreting the effects of war. On Monday, the Conference Board reports its March Consumer Confidence Index, which is expected to have declined to 63 points, from 64 the previous month. And on Friday, the University of Michigan revises its Consumer Sentiment Index for March. Economists expect the figures to stay unchanged from the initial reading of 75 points.
Other economic indicators for the week include the revised fourth-quarter gross domestic product numbers, which are expected to show no change from the originally reported 1.4% increase.
Another factor could be the so-called window dressing that fund managers occasionally dabble in near the end of the quarter. (To embellish their portfolios, managers with extra cash purchase the best-performing stocks of the period so it appears they are well-positioned.)
In corporate earnings, Anglo-Dutch consumer products maker
releases its preresults update on Monday, ahead of its first-quarter earnings report May 2.
reports its quarterly results Tuesday. Last week, the company said it will sell $1.5 billion of bonds convertible into
AOL Time Warner
shares to raise money for acquisitions.
On Thursday, oil producer
( EP) will release its quarterly results. The energy powerhouse struck a $1.7 billion deal with the state of California over claims the company had unfairly withheld critical gas supplies.