A deluge of reports, including consumer confidence, employment and third-quarter economic growth, will either stoke or stop the market's recent rally in the coming week. "It's all about the economic data next week," says Peter Cardillo, chief market analyst at S.W. Bach. "And we expect strong enough numbers to keep the end-of-year rally in full force." The major averages enter next week at their best levels in four and a half years, pushed up in part by speculation about holiday retail sales. Traders say they expect indications on sales activity over the weekend to be one of Monday's major market movers. According to one trade group, the holiday season is shaping up quite nicely. The National Retail Federation recently raised its sales outlook for the season, based on economic indicators showing surprising vitality after a year marred by gloom. The private group hiked its sales forecast for November and December up a full percentage point to a gain of 6% over last year. Still, the figure would mark a slowdown from last year's pace of 6.7%. The health of the housing sector, which has been considered the linchpin of the economic recovery, will be another focus when October existing home sales figures are released on Monday. The Thomson First Call estimate is for 7.2 million, down from 7.28 million the prior month. Nevertheless, Paul Mendelsohn, strategist at Windham Financial, advises investors against overreacting to the anticipated decline in sales. "We are entering a traditionally slow period for new-home sales," says Mendelsohn. "Furthermore, we are still at historically high levels for housing sales. So a slight pullback is to be expected." On Tuesday, durable goods orders for October will be released. Economists expect a rise of 1.5%, compared with the 2.4% drop in September.
Consumer confidence for November also arrives on Tuesday, with the market expecting a reading of 90, up from 85 last month. The U.S. economy will be in the spotlight on Wednesday when the revised third-quarter GDP is released. The Thomson First Call consensus estimate is for growth of 4.1%, up from 3.8% last period. The Fed's beige book also will be delivered on Wednesday, along with the Chicago PMI, which is expected to fall to a reading of 60 in November, down from 62.9 in October. Thursday, the first day of December, will be chock full of economic data as well. Auto and truck sales for November will be released in addition to personal income and spending for October. Traders also will home in on the ISM index for November. Economists are looking for the ISM to fall to 58 from 59.1 in the prior period. The all-important November nonfarm payroll data should dominate early trading on Friday. The consensus estimate is for 222,000 jobs to be added, up from the disappointing 56,000 in October. The unemployment rate is expected to remain steady at 5%. "A weak payroll report would almost certainly revive the view that the Fed might hint at a pause when it delivers its Dec. 13 policy statement," says Randy Diamond, sales trader at Miller Tabak. "On the other hand, strength in payrolls would tilt views back toward a 4.75% fed-funds rate instead of 4.50%."
Among the companies reporting Wednesday are Dress Barn ( DBRN) and Jack In The Box ( JBX). Investors will be able to see if Tiffany ( TIF) shines when they report earnings on Wednesday. Analysts expect the company to earn 16 cents a share, up from 14 cents last year, on $504 million in revenue. Finally, on Thursday, the first day of December, the market will hear from the likes of Del Monte Foods ( DLM), Finisar ( FNSR) and Multimedia Games ( MGAM). World Wrestling Entertainment ( WWE) will try to avoid being slammed on Thursday. Analysts expect the company to earn 7 cents a share, up from 4 cents last year, on $81 million in revenue.