The third quarter winds to a close in the coming week, along with a September that has been unusually uplifting for investors.
So far this month, the
is up by 127 points, or 1.12%. The
has gained 11 points, or 0.84%, while the
has tacked on 35 points, or 1.61%.
"September is traditionally terrible for investors, but this year, the stock trader's almanac has been proven wrong," says Larry Wachtel, senior market analyst at Wachovia. "The big problem going into the final week is that the market is overextended, and we started to see that with the selloff at the very end of last week."
Last week ended on a down note after a report on business activity from the Federal Reserve Bank of Philadelphia came in softer than expected, sending stocks lower Thursday and Friday.
In the market's favor for the coming week, says Wachtel, is that the fundamentals that have driven the market higher over the past two months are still intact, as well as the possibility that fund managers will do some "window dressing" before the quarter ends.
"Interest rates have been falling, oil prices have been coming down and the market has seen a change in leadership from commodities back into tech and financials," says Wachtel. "That's a nice tailwind."
Randy Diamond, sales trader at Miller Tabak, agrees that the market may have trouble in the coming week, but disagrees on which way the proverbial winds are blowing.
He says weak economic data, which the market embraced during the
rate-hiking campaign, now are less likely to be looked upon as favorable. That was demonstrated in last week's market downturn Thursday and Friday.
"With the 'Fed done' theme pretty much running its course, headwinds for stocks are now blowing in the wrong direction," says Diamond. "The new reality for stock investors is focusing on the weaker economy. Or in other words, bad data has now become bad data."
Among that bad data are increasingly negative signs about the housing market. And housing was in the uppermost of the Fed's thinking at last week's meeting. In its policy statement, the Fed observed that "the moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market."
More color on the housing market arrives on Monday, with the release of August existing-home sales. According to Thomson First Call, economists are expecting homes to have sold from an annualized rate of 6.25 million units, down from 6.33 million in July. Of key importance will be inventory figures, which reached record levels in July.
On Tuesday, the lone economic indicator slated for release is the consumer confidence index. Economists are expecting the index to jump to 103, up from a reading of 99.6 the prior month.
Housing will be back in the spotlight Wednesday, as the Commerce Department releases August new-home sales. New-home sales are anticipated to drop to a rate of 1.05 million on an annual basis, down from 1.07 the month before.
Meanwhile, August durable good orders also will be released Wednesday. The orders are expected to rise 1% for the month, a big turnaround from the decline of 2.4% in July.
"Housing is going to see continued weakness and could possibly surprise on the downside, but that will only make the economy look weaker than it actually is," says Milton Ezrati, chief economist at Lord Abbett. "On the other hand, the durable goods data should come in relatively strong because corporations are cash rich and they are spending on new equipment."
The finalized second-quarter gross domestic product figures are scheduled for release on Thursday. The expectation is for growth of 2.9%, while the chain deflator is anticipated to remain unchanged at 3.3%.
Friday's big economic announcements include personal income and spending data for August. Economists predict 0.3% growth in incomes, down from a 0.5% rise in July, while spending for the month is expected to show growth of 0.2%, down from 0.8% the month before.
The Chicago PMI also will be released on Friday. It's expected to fall to 57 in September from 57.1 in August.
Earnings Calm Before Storm
Though the coming week marks the end of the quarter for most, there are several companies ready to report results for their own periods. Still, the pace is relatively light compared to the onslaught of third-quarter reports set to begin in a few weeks.
The market will hear on Monday from
. Analysts expect the drugstore chain to post fiscal fourth-quarter earnings of 41 cents a share, up from 36 cents last year, on $12 billion in revenue.
On Tuesday, companies announcing quarterly results will include
Wednesday will be a slow day on the earnings front, though spice maker
and industrial products company
will release their numbers.
Among the companies reporting Thursday are
Research In Motion
will be the tech highlight of the day. Analysts expect the BlackBerry maker to post earnings of 71 cents a share before certain items, with $546 million in revenue.
The week will be rounded out with reports from