NEW YORK – The stock market, which has been singing the blues most of this year, will carry that tune into this week as Wall Street's persistent accounting anxiety and investors' glum mood help push stocks lower.
Signs that the U.S. economy is making a comeback could offer the stock market a pick-me-up with a slew of economic data set for release and a speech on the economy by the nation's top central banker on tap.
But it won't be enough to lift the gloom now gripping investors with no relief in sight from the nagging worries about dubious bookkeeping and mounting debt in the U.S. telecom sector that have been plaguing stocks for weeks, analysts said.
"The unfortunate thing for the bull [market] case right now is that the economy is probably out of recession, but now this accounting cloud is really holding things back," said Nat Paull, portfolio manager at New Amsterdam Partners, which oversees about $1 billion.
Investors will be awaiting confirmation that the U.S. economy grew faster than previously reported at the end of last year, with fourth-quarter U.S. gross domestic product data due early next week.
Earnings news is likely to take a back seat to other issues, although investors will be tuned in for results from retailers like Gap Inc., Home Depot Inc., Lowe's Cos., Target Corp., and Federated Department Stores Inc.
Bankrupt high-speed communications firm Global Crossing Ltd. , whose accounting practices are under review by federal regulators, also is set to report results this week.
Economic Picture Brightens
After months of fretting about recession, economists have been scrambling to raise their forecasts for U.S. growth, increasingly convinced by signs like better retail sales and a narrower trade gap. These signals have raised hopes that the recession that began last March will be short and shallow.
The GDP data, along with reports on personal income and spending, consumer confidence, the manufacturing sector, durable goods, existing and new home sales and construction spending could underpin stocks, analysts said.
Federal Reserve Chairman Alan Greenspan will grab the spotlight when he gives his twice-yearly testimony on the economy to Congress, speaking before the House Financial Services Committee on Wednesday and later testifying before the Senate Banking Committee.
"I still think the market is going to be very concerned with not only accounting issues, but the fact that the market's just been rather weak lately," said Jeffrey Kleintop, chief investment adviser at PNC Advisors. "Investors are just going to be content to sit on the sidelines."
No Time for Funky Bookkeeping
The still developing scandal surrounding bankrupt energy trader Enron Corp. has kicked off a string of earnings restatements and investigations into the validity of Corporate America's accounting that have raised questions about whether some stocks are fairly valued.
Investors are more carefully combing through companies' financial statements before they buy and are ready to run for cover at the first hint of impropriety, analysts said.
Those jitters, along with persistent concerns about bad debt at telecom firms like Qwest Communications International Inc., have pummeled the market in recent weeks.
Last week, the Nasdaq Composite Index sank 4.4 percent in a holiday-shortened week. The Dow Jones Industrial Average ticked up just 0.65 percent and the Standard & Poor's 500 fell 1.3 percent.
Year to date, the Nasdaq is down 11.6 percent, the S&P 500 is off 5.1 percent and the Dow is down 0.5 percent.
The technical outlook also offers little encouragement for better days ahead, analysts said. In eight out of the past 11 bear markets, stocks have climbed off their lows, only to give back a big chunk of that gain before heading significantly higher again, Kleintop said.
If history is any guide, the S&P 500 will test the area around 1,069, giving up about half of the gains it made from three-year lows hit on Sept. 21 to the recent highs of early January, he added.
"There's a negative sentiment and anything negative ... in the accounting area could knock the market down," said David Dreman, chairman and chief investment officer of Dreman Value Management, which oversees about $7.5 billion. "Even if the economic news is only slightly less favorable than expected or slightly under estimates, that could have dampening effect."
Data to Flood Market
The government's report on fourth-quarter GDP, due on Thursday, is expected to show a rise of 0.8 percent, according to a Reuters poll. The initial 0.2 percent reading surprised the market, which was expecting a contraction in growth.
A day ahead of that, investors will examine a report on January durable goods orders, particularly for the data it provides on capital spending. Durable goods are expected to have risen by 1.6 percent in January after a 1.7 percent gain in December.
More crucial numbers will flood in on Friday, when the Institute for Supply Management, formerly known as the National Association of Purchasing Management, releases its closely watched manufacturing sector survey.
Economists predicted the industry trade group's monthly index rose in February to 50.9 — indicating growth for the first time since July 2000 — from a January reading of 49.9.
A report on consumer confidence, put out by a private research group, The Conference Board, will also catch investors' attention next week.
The Consumer Confidence Index, set for release on Tuesday, is widely expected to have halted its rise in February, partly because of the sagging stock market. Economists predicted it fell to 96.8 in February, after a reading of 97.3 in January.