NEW YORK – Investors may pack up and leave next week as the Republican National Convention (search) comes to New York and many on Wall Street take vacation, draining U.S. markets of volume and leaving stocks flopping around with little direction.
Still, crude oil prices and the jobs report for August will command the market's interest.
Worries that New York will become a chaotic mix of convention delegates, peace protesters and police is prompting many who work in financial markets to take cover elsewhere. The city is also seen as a potential target for Al Qaeda (search), who has vowed to disrupt the U.S. presidential election process.
"People are still worried that some sort of terrorist activity will occur during the Republican convention," said Edgar Peters, chief investment officer at Boston-based PanAgora Asset Management Inc. "Because of that, everyone is just sort of sitting by the sidelines."
August is typically the slowest month of the year for Wall Street. But the situation is likely to be exacerbated by the convention, which begins Monday.
The exodus of investors has already started.
Friday, the New York Stock Exchange (search) had its lightest volume day for the year so far. Just 848 million shares changed hands, below the NYSE's daily average last year of 1.4 billion.
Nevertheless, the blue-chip Dow Jones industrial average (search) closed Friday at 10,195.01, a six-week high. The Dow got a lift from consumer confidence data, an uptick in tech stocks and a drop in U.S. oil prices to around $43 a barrel.
For the week, the Dow rose 0.8 percent, while the tech-laden Nasdaq Composite Index climbed 1.3 percent, and the broad Standard & Poor's 500 gained 0.9 percent.
Although the pace on Wall Street will resemble a video replayed in slow motion next week, that doesn't mean a rally would be out of the question for stocks.
"For retail, this is a slow time anyway and people do not bring their laptops to the beach," said Ken Worthington, an analyst with CIBC World Markets who covers brokerages and trading firms.
"The same thing goes for institutions. Historically, the last two weeks of August are the slowest time of the year and this year appears it will be worse than normal because of the convention," he said.
There are no initial public offerings scheduled for next week as the IPO market takes its annual summer holiday until after Labor Day.
In recent months, trading companies have struggled in a period marked by low volatility and low volumes in equity and options markets.
Even with low volume, some still see a "relief rally" if the convention ends without serious incident, strategists said.
"The simple fact is that a lot of people are concerned and that's why they are looking at that time period so cautiously," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. "If we get to Friday and nothing happens, we could see a relief rally."
All eyes will be fixed on the Labor Department's (search) employment report for August, which will be released Friday.
Economists expect 160,000 jobs were added to the payroll during the month, up sharply from last month's shocking report which showed anemic job growth of just 32,000 jobs in July.
"The jobs report is going to be an important indicator of which direction we're going in terms of unemployment. We've had conflicting signals at this point," said Gordon Fowler, Jr., chief investment officer, of The Glenmede Trust Co.
The forecast calls for the nation's unemployment rate to remain steady at 5.5 percent in August, according to economists polled by Reuters.
Crude oil prices will once again be watched closely, although U.S. oil futures have fallen from peak levels, providing some relief for equity markets. U.S. October crude futures ended Friday's trading in New York at $43.18 a barrel, down sharply from the record of $49.40 set a week ago.
"This retreat we've seen in crude oil, I think, will put us in a range of $42 to $45 a barrel," Cantor Fitzgerald's Pado said. "I don't see any major moves for crude next week on a technical basis, looking at the charts."
Auto makers will report sales for August Wednesday. Hurricane Charley's (search) damaging path through Florida and the growing ineffectiveness of sales incentives caused U.S. car and trucks sales to slip this month, analysts say.
U.S. retailers will report August sales Thursday, shedding some light on consumer demand during the crucial back-to-school season. Wal-Mart Stores Inc. , the world's largest retailer, already provided a preview, warning this week that its sales for the month were disappointing.
The second-quarter earnings season has largely wrapped up, but grocer Albertsons Inc. will report its second-quarter earnings Tuesday. Other companies with quarterly reports next week include jewelry chain Zale Corp. (ZLC) and auto parts retailer CSK Auto Corp. (CAO).