NEW YORK – U.S. stock investors will look next week at the Chicago (search) purchasing managers' index and the February payrolls report to assess the economy's health, strategists and traders said.
Tensions in the Middle East (search) also will get renewed attention on Wall Street (search) after a fatal bombing outside a Tel Aviv nightclub shattered a de facto truce by militants, which had raised hopes for peace.
On Friday, both the blue-chip Dow Jones industrial average and the broad Standard & Poor's 500 index hit fresh closing highs for the year, topping off a three-day rally. The gains put the Dow back on positive ground for 2005 — up 0.54 percent.
Friday's stock market advance was driven by oil companies' shares, including Exxon Mobil Corp. (XOM), hitting lifetime highs as crude oil futures prices climbed closer to $52 a barrel.
The boom in commodities prices pushed the Reuters CRB index of 17 commodity futures above 300 on Friday for the first time in 24 years.
"I think we will have an up week," said Andre J. Bakhos, president of Princeton Financial Group. "What could trip up the scenario is the econometric numbers. It's a big week for the economic numbers and that could tilt the scales."
In the coming week, two closely watched U.S. economic reports will serve as bookends. On Monday, the National Association of Purchasing Management-Chicago will release its closely watched reading on the Midwestern region's economy for February. On Friday, the Labor Department's report on February U.S. non-farm payrolls will come out.
If the numbers exceed expectations, that should give the stock market more fuel to run higher, analysts said.
Although the market didn't react much, it got some welcome news early on Friday when the Commerce Department said growth in U.S. gross domestic product, which measures total output of goods and services within U.S. borders, was stronger in the fourth quarter than previously thought.
For the week, the Dow rose 0.52 percent, the S&P 500 advanced 0.81 percent, and the Nasdaq Composite Index edged up 0.33 percent.
Taking the Labor Market's Pulse
On Friday, the February employment report will give investors a sense of the labor market's strength.
January's data showed U.S. employers added just 146,000 jobs during the month. That reading was weaker than expected. But stocks rose because the softer data eased some investors' concerns that the Federal Reserve might shifts its pace of gradual interest-rate hikes to a more aggressive mode.
Commerzbank forecasts that non-farm payrolls for February will rise by 200,000.
"There is little doubt that job growth is now on an upward path, which will continue to support market optimism that the U.S. is set to post solid growth again this year," Commerzbank said in a research note.
Economists polled by Reuters expect that non-farm payrolls added 220,000 jobs in February.
Friday's economic headlines will include a final reading for February from the University of Michigan on consumer sentiment. Economists see the Michigan consumer sentiment index slipping to 94.5 from 95.5.
The forecast for Monday's report on the Chicago purchasing managers' index calls for a drop to 60.2 for February from 62.4 previously, a Reuters poll of economists showed.
Among other reports that investors will watch in the week ahead are: on Monday, personal income and spending data, plus new home sales; on Tuesday, the Institute for Supply Management's manufacturing data, plus domestic car and truck sales; on Wednesday, the mortgage market report and refinancing index, plus the government's weekly energy inventory statistics, and on Thursday, the latest weekly initial jobless claims, plus the ISM's non-manufacturing, or services, index, as well as data on productivity and unit labor costs.
Earnings, Oil and the Dollar
The earnings calendar calls for results from ketchup maker H.J. Heinz Co. (HNZ) and Tiffany & Co. (TIF), the luxury jewelry retailer known for its robin's egg blue boxes, both on Monday; insurance brokerage Marsh & McLennan Cos. on Tuesday, followed by apparel maker and retailer Liz Claiborne Inc. and wholesale club operator Costco Wholesale Corp., both on Wednesday.
In the opinion of at least one Wall Street expert, investors may be overlooking some positive fundamentals.
As the earnings season winds down, S&P 500 companies are showing fourth-quarter profit growth of about 20 percent and more than 60 percent of companies are beating expectations, according to Reuters Estimates.
"People are not focusing on the general tenor of the economic recovery and earnings, which I think are better than people have" realized, said Philip Dow, director of equity strategy at RBC Dain Rauscher.
Wall Street will keep a weather eye on oil prices, which barreled back above $50 a barrel this week.
On the New York Mercantile Exchange, crude for April delivery ended on Friday at $51.49 a barrel, down from a four-month high of $52.05 it hit on Thursday.
The dollar will stay on center stage, following its gyrations this week after South Korea's central bank indicated it was thinking about diversifying some dollar holdings in its reserves.
Late on Friday in New York, the euro was up 0.3 percent at $1.3243. The dollar dipped 0.06 percent to 105.24 yen.