With few big companies set to release earnings next week and Iraq still hanging over the market, stocks are likely to remain steady until Thanksgiving.
Economic statistics are pointing both ways on Wall Street, with signs the consumer — the pillar of a slow economy — is willing to keep spending offset by evidence that manufacturing capacity and business investment are at low levels.
Add to that the uncertainty the Iraq stand-off represents, and markets are unlikely to budge much in the coming week.
"The markets are unable to really trend right now because there is a cloud hanging over the market and it is the Iraq situation, said Paul Cherney, chief real-time market analyst at S&P Marketscope. "I expect us to go sideways until probably around Thanksgiving."
All three major indexes — the Dow Jones industrial average, the Nasdaq composite and the Standard & Poor's 500 — posted a weekly gain Friday as investors took data on consumer spending as reassurance they are still spending money, easing any fears the economy may slip back into a recession.
Cherney said he was confident stocks are past five-year lows they touched in early October, but investors are trying to juggle too many potential influences.
Also tempering any rise in share prices is a lack of big investment flows into the stock market.
"We had a wonderful lift, but now it's like 'Let's wait and see how things are going,"' he said. "It's going to take more for people to be convinced that it's safe to put your feet back in the water."
The broad-based S&P 500 and the tech-heavy Nasdaq got their biggest single-day bounce in a month Thursday, when the Commerce Department reported retail sales in October logged the largest gain in six months. An unexpectedly strong 0.7 percent when auto sales are stripped out drove share prices higher.
The University of Michigan's preliminary gauge of consumer sentiment for November rose to 85, sources said. That ended a five-month slide in sentiment and beat the Street's forecast.
The S&P 500 index ended the week up 1.7 percent, with the Nasdaq jumping 3.8 percent and the Dow rising 0.5 percent.
A positive reading in the Empire State Manufacturing survey in New York Friday could foretell a rebound in manufacturing when the Philly Fed Survey is released next Thursday, said Steve East, chief economist at brokerage and investment bank FBR & Co. Inc. of Arlington, Virginia.
East said the stock market in coming months should get a push from extra cash consumers will get from another wave of home mortgage refinancings that are in the pipeline, and the possibility manufacturing will pick up in the first quarter.
"Consumers seem to be in better shape. One ought not underestimate the American consumer's propensity to spend," East said, adding that with refinancing money in hand, "They're going to spend some of that money at Christmas holidays."
The U.S. Consumer Price Index for October, set for release Tuesday, is expected to gain 0.3 percent, compared with September's 0.2 percent rise, according to economists polled by Reuters. October U.S. housing starts, Wednesday, are forecast to have declined from September's pace.
East said the economy seems to be in a pattern similar to the 1991 recession, when several months of rising output was followed by a downturn, and then another gain at year-end put the U.S. economy on a growth path for the rest of the decade.
"I'm just struck by a lot of similarities. We need to consider at least the possibility maybe manufacturing has seen the worst.
"If my thesis is correct, you'll see consumers once again save the day in the fourth quarter," he said. If stocks don't rise after the Fed's rate cut, "People might get depressed. The Fed fuel isn't burning in the stock market engine."
Jeffrey Lindsey, head of large-cap growth at State Street Research, which manages about $46 billion, said there are a lot of weekly government statistics that pull on the market. Instead, he said trying to gauge how companies are putting together their 2003 budgets is more important.
"We're looking for commentary from companies that they're going to increase their spending. We're trying to infer they're getting more optimistic or not," he said.
The stock market's next major trend is up, Lindsey said.
Among shares Lindsey likes are Dell Computer Corp. (DELL), which he said has a major cost-structure advantage; medical device maker Boston Scientific will likely grab 50 percent of the market for drug-coated stents, which is "more than people think," and Amgen Inc., the biggest U.S. biotechnology company, has two new cancer products.
"People will be disillusioned with less than 1 percent in their money market funds. I'm feeling pretty good about the stock market," though, he added, "The volatility is very difficult to deal with."