NEW YORK – Anybody hoping for a stock market rally should probably just take this week off. With little economic data and few earnings reports due, trading likely will be one of those exercises in wait-and-see.
Market watchers certainly can be pleased by the fact that last week, despite bad news that created some price volatility, Wall Street remained resilient for the second week in a row. However, it was also the second straight week where stocks failed to advance.
There's nothing really fundamentally wrong with the market. Corporate profit growth is expected to slow as the year goes on, but for now, Wall Street seems to believe that stocks are fairly valued and a good investment.
However, the big uncertainty centers around how much corporate profits and the economy will slow this year. There are signs that the slowdown has already begun, given the fourth quarter's quite lackluster 1.6 percent growth in gross domestic product. Yet there have been tantalizing signs of strength in manufacturing and other sectors. In the end, nobody can reasonably estimate when slow economic growth with start to eat into corporate profits, and by how much.
That's led to what traders call a "range-bound" market, and they tend to say it with more than a little disappointment. Investors can make money so long as stocks go somewhere — up or down. But a range-bound market means there's just not enough price movement to work with.
The Federal Reserve's next interest rate decision March 28 could come with an economic outlook that clarifies matters, but that's a long way off. Until Wall Street gets a better picture of the economy, the market will stay stuck, perhaps with 100-point swings on a given day, but ultimately stuck in the same range as the past two weeks.
Last week, the Dow Jones industrial average lost 0.84 percent, the Nasdaq composite index gained 0.89 percent and the Standard & Poor's 500 index was essentially flat, down just 0.01 point for the week.
The most notable economic report won't come until Friday, when the Labor Department releases its monthly job creation report. Analysts expect the economy to have created 200,000 jobs in February, up from 193,000 in January. While your average person would be very happy to see more people employed, investors would prefer slower growth in labor so there's less demand — and less chance of inflation getting the Fed's attention.
More signs of a slower economy are expected in the Commerce Department's report on factory orders, which are expected to have declined 5.5 percent in January. While this number rarely strays from Wall Street's predictions, a worse-than-expected number would be a huge blow to the markets.
This week is right in the middle of the earnings doldrums, with fourth-quarter results all but finished and the preliminary wave of first-quarter results, mostly from Wall Street firms, coming the following week. For now, only a handful of companies are reporting in the week ahead.
Pixar Animation Studios, to be acquired by The Walt Disney Co. for $7.4 billion, could be issuing one of its last earnings reports as an independent company. The animated film producer, scheduled to release its earnings Tuesday afternoon, is expected to earn 18 cents per share, down from 46 cents per share a year ago when it released "The Incredibles" in theaters. Shares of Pixar have soared 58 percent from their 52-week low of $40.80 on Sept. 22, closing Friday at $64.59, just 57 cents below its 52-week high.
Another takeover target, supermarket chain Albertson's Inc., is reporting earnings Tuesday morning and is expected to earn 44 cents per share for the quarter, down from 52 cents per share last year. Albertson's, to be acquired by Supervalu Inc., CVS Corp. and private investors, has risen 32 from its 52-week low of $19.26 on March 18, 2005 thanks in part to the acquisition. It closed Friday at $25.38.
In such an interest rate-sensitive market, speeches by members of the Federal Reserve's rate-setting board are often heavily parsed on Wall Street. Three Fed governors will be speaking this week, and each has the potential to give the market clues as to how the Fed perceives the economy.
Chicago Fed President Michael Moskow is speaking at the University of Chicago on Tuesday, St. Louis Fed President William Poole will speak Wednesday at an economic development group there, and New York Fed President Timothy Geithner will speak on global economies and trade on Thursday.