NEW YORK – U.S. stock investors will watch oil prices and durable goods orders next week to discern the strength of corporate and consumer spending.
Stocks, which have been resilient this summer as crude climbed above $60 a barrel, wavered this week after Wal-Mart Stores Inc. (WMT), the world's biggest retailer, warned on Tuesday that rising oil prices were taking a toll on consumer spending.
"There is a growing impression that the consumer is weakening. We saw that in a lot of the retail data, Wal-Mart being most visible," said Tim Ghriskey. chief investment officer of Solaris Asset Management in Bedford Hills, New York.
"It shows the high price of gas at the fuel pump in addition to the rise in short-term interest rates, which impacts a lot of the mortgages out there, are influencing consumers."
Optimism in Spite of Oil Costs
U.S. crude oil futures for September delivery shot up on Friday. Ecuador halted its exports of the commodity. A rocket attack against two U.S. warships in Jordan also added to concerns about supply disruptions and drove oil futures higher.
On the New York Mercantile Exchange (search), September crude climbed $2.08 to settle at $65.35 a barrel.
But stocks resisted a decline on oil concerns and closed little changed on Friday, with the major drag coming late in the session from a Texas jury's verdict against pharmaceutical giant Merck & Co. (MRK), a Dow component.
"The economy is still doing fine. Certainly, oil is very high and it is a matter for concern, but there's no indication it will hit the economy in the next four or five months," said Warren Simpson, managing director at Stephens Capital Management in Little Rock, Arkansas. "Therefore, we expect companies' results to still be strong through the end of the year."
For the week, stocks fell. The blue-chip Dow Jones industrial average (search) finished the week down 0.39 percent,while the broad Standard & Poor's 500 index (search) dropped 0.87 percent, and the tech-laced Nasdaq Composite Index (search) lost 0.99 percent.
Durable Goods and Home Sales
With no other major economic indicators on the calendar, data on orders for durable goods, which are products made to last three or more years, will garner attention as the report will give the market a clue as to how much capital investment companies are making.
The Commerce Department is expected to report on Wednesday that durable goods orders fell 1.2 percent in July, according to economists' forecasts in a Reuters poll. Excluding the volatile transportation sector, orders probably slipped 0.6 percent, according to the median forecast.
"Since we don't have a lot of economic data, the most important will be durable goods," said Alfred Kugel, chief investment strategist at Atlantic Trust/Stein Roe in Chicago.
The booming U.S. housing sector will be in the spotlight for two days in a row next week, with the release of existing home sales on Tuesday and new home sales on Wednesday. Economists polled by Reuters are predicting slight declines in both.
Pass the Ketchup, Please
On the earnings lineup, condiment maker HJ Heinz Co. (HNZ) will report results on Monday, followed by tax software maker Intuit Inc.(INTU) on Wednesday and discount retailer Dollar General Corp. (DG) on Thursday.
With only a handful of companies scheduled to report earnings, any corporate news may have a bigger impact than usual on the stock market.
"The end of August can surprise," Ghriskey said. "There can be some news on the investment banking or mergers and acquisition front.
"My guess is we will see more deals happening," he added. "There's a push to get them done by the end of the year and there's a lot of private equity money out there that needs to be put to work. We may see them taking public companies private."
Google Inc.'s (GOOG) announcement on Thursday that it would issue up to an additional 14.8 million shares to raise $4 billion stirred speculation among analysts that the world's most popular Internet search engine is looking to make some acquisitions.