Months of international diplomacy over the disarmament of Iraq could come to a head next week, as the U.S. weighs the benefits of a dialogue with allies against its threats of war.
The U.S. goal of a March 17 deadline to vote on a possible U.N. resolution to disarm Iraq has been put off, but American military forces continue to build up in the region, with four B-2 bombers dispatched to the Indian Ocean.
"Doesn't the strength of the rhetoric make it seem unreasonable to assume this could drag on past next week?" asked Barry Berman, head trader at Robert W. Baird. "Something seems like it has to be resolved in the coming week. But I have no idea what to expect with news regarding Iraq."
As it has for much of the last month, the stock market will continue taking its cues from the war front. The weekend news will be especially important, with President Bush making a last-minute diplomatic push by meeting with fellow war supporters Britain and Spain on Sunday. If the trio can come up with a resolution that the U.N. Security Council can approve, then war may be delayed until the end of March, or even later.
Stocks saw a nervous week last week. The
Dow Jones Industrial Average
gained 1.5% for the week, boosted by a rally Thursday, while the
rose 1.7% and the
Thursday's rally is seen as important because the Dow came within 240 points of a five-year low on Thursday but ended the session with its best percentage gains in nearly six months.
"This has been a trading market that's been on quite a downtrend," said Berman. "Next week's action will be important to see if that rally over the last couple days is really going to hold."
While the war casts uncertainty over Wall Street, investors will nonetheless have to sort through first-quarter earnings next week. Look for doughnut chain
on Tuesday, along with
, the second-largest software maker after
. Wednesday brings homebuilder
Thursday is the biggest day for earnings releases, with
rounding out the brokerage releases and
providing a look at technology fortunes.
On the economic front, building permits and housing starts for February will be released on Tuesday. Thursday features initial jobless claims for the week of March 15, leading economic indicators for February and minutes from the last Federal Open Market Committee meeting. The consumer price index, a gauge of inflation, will be released on Friday.
Ultimately, earnings and economic data will take a back seat to the latest war news. Expect the unexpected and keep a close eye on this weekend's headlines. Any diplomatic breakthrough, or lack thereof, could well determine the direction of next week's tape.