Investors who have been stomaching the twists and turns of the stock market recently might want to prepare for another bumpy ride during the holiday-shortened first week of September.
Stocks gyrated over the past week amid mixed economic reports and continued troubles in the financial sector. Ultimately, the
Dow Jones Industrial Average
all lost ground.
Another big driver of stock movements has been fluctuating oil prices. Tropical Storm Gustav remained on track for the Gulf Coast on Friday, threatening to cut production and boost prices. Crude futures mostly inched up in volatile sessions throughout the week, until they closed down $2.56 on Thursday at $115.59 a barrel. On Friday, they settled at $115.46.
"Next week is going to be another volatile week, and the market is really going to be driven by oil prices," says Don Wordell, manager of RidgeWorth Capital Management's mid-cap value fund. "The thing I'm most focused on right now is the impact Hurricane Gustav is going to have on production in the Gulf, and the impact that has on energy prices."
The U.S. market will be closed Monday for Labor Day.
Oil prices might be held back a bit by the dollar's gains against European currencies, with the euro down nearly 6% and sterling off more than 8% against the greenback in August. The rally comes with indications that the economic downturn in the U.S. has spread to Europe, and may hit overseas even harder.
"I guess the weaker guy loses as far as currency is being concerned," says Gerry Sparrow, manager of the Sparrow Growth Fund. Sparrow says the drop in oil prices, combined with better-than-expected GDP growth and indications that the housing market may be improving, has helped the consumer-discretionary companies in which he invests.
"It's a potential wind behind their back instead of the wind in their face all the time," Sparrow says.
The coming week will also provide some insight into the deteriorating job market, with the release of
monthly jobs report and the official Labor Department data. Economists expect the U.S. to shed around 70,000 jobs, with the unemployment rate holding steady at 5.7%.
"In a holiday-shortened week, all attention will be on Friday's employment report," Lehman Brothers analyst Michael Hanson wrote in a research report.
Other data on construction spending and mortgage applications and delinquencies should provide some incremental evidence about whether the housing market has yet
. While no one expects the reports to be strong, nonresidential construction has remained resilient, with spending up 13% over the past six months on an annualized basis, according to Lehman analysts.
earnings report on Thursday will also provide some clues about the health of the housing sector. Analysts expect Toll, one of the nation's largest homebuilders, to lose 19 cents a share for the quarter ended in July, according to Thomson Reuters. However, estimates vary widely among the 15 analysts polled, from a loss of 65 cents to a profit of 32 cents.
Other major earnings reports will come from financial-services firm
, defense contractor
and office-supplies seller
Outside of statistical reports, on Wednesday the
will release its so-called Beige Book, which is a collection of anecdotal information about local economies across the U.S. Several Fed governors, including Boston's Eric Rosengren, Dallas' Richard Fisher and San Francisco's Janet Yellen, are scheduled to discuss their views on the economy during the week.
The Fed information should provide useful evidence of how stressed markets -- particularly California, Nevada and Florida -- have been faring recently, and how the influential governors perceive the broader economic picture.
Another statistical release will likely affect the stocks of automakers
, which have been struggling to boost sales as consumers cope with declining wealth, tight credit conditions, layoffs and high gas prices.
Even if the truck and auto sales number slated for release edge up slightly, the increase will likely come at the expense of profit margins, with dealers offering big incentives to draw in cash-strapped consumers.