With earnings season squarely in the rearview mirror, economic news from home and abroad will dictate whether stocks can rise to the next level in the coming week. "We are at a major crossroads here," says Ken Tower, chief market strategist at CyberTrader. "If we are unable to break out of this trading range to the upside soon, then there is a danger that we could quickly slide back down again to the lows." The S&P 500 has been bumping up against its 4 1/2-year highs of late, flirting with the 1,300 mark. The week's first piece of economic data arrives on Monday, when January factory orders are released. Economists surveyed by Thomson First call expect orders to decline 5.1%, compared with a 1.1% increase in December. "We'd like to see this number strengthen, however, estimates have been revised lower, which is possibly a result of the same affliction that caused the drop in durable goods two weeks ago, namely a slowdown in aircraft orders," says Robert Pavlik, chief investment officer at Oaktree Asset Management. On Tuesday, revised fourth-quarter productivity figures and consumer credit numbers for January will be released. Economists are expecting productivity to come in at negative 0.2%. Consumer credit is expected to jump to $5 billion from $3.3 billion in December. America's trade balance for January will be the focus on Thursday. The consensus estimate projects a deficit of $66.5 billion for the month, wider than December's deficit of $65.7 billion. "It's a big week on the international front and not just from our side," says Paul Mendelsohn, strategist at Windham Financial. "The Bank of England and the Bank of Canada will be making announcements next week plus the Bank of Japan says it's going to start draining liquidity from its system in advance of its first rate hike in years." At home, the 10-year note has sold off recently, and any change in foreign demand, also known as indirect bidding, will be closely scrutinized.
Friday will see the release of February's nonfarm payroll data. Economists estimate 200,000 new jobs were added in February, up from 193,000 in January. The unemployment rate is expected to tick up slightly to 4.8% from 4.7%, while hourly earnings are projected to decline to 0.3% in February from 0.4% the prior month. "The employment situation is always a market mover because it is one of the Fed's favorite indicators when it comes to designing their policy statement," says Mendelsohn. The Fed is widely expected to raise the fed funds rate by a quarter-point to 4.75% at its March meeting. The Treasury budget for February also will be released Friday. Economists expect the data to show that the nation's deficit slimmed down to $111.3 billion from $113.9 billion in January.