NEW YORK – Wall Street may encounter some turbulence this week, with Iran's nuclear dispute with the West poised to come to a head and the latest earnings reporting season all but done.
Developments surrounding Iran's nuclear ambitions probably will keep U.S. stock investors on edge, analysts said. They believe the stock market is likely to consolidate some of last week's gains.
Besides keeping tabs on geopolitical events, investors will pay attention to speeches by several Federal Reserve officials. Fed Chairman Ben Bernanke is set to address an economic forum in Jackson Hole, Wyoming, Friday.
Iran said it will respond by Tuesday to a package of incentives proposed by six world powers if Tehran halts all nuclear activities.
However there has been no sign of acceptance on Iran's part. Tehran has denounced a U.N. Security Council resolution demanding that Iran stop nuclear work by Aug. 31 or face the threat of sanctions. The United States and its allies suspect Iran of secretly trying to build nuclear weapons. But Iran says its wants nuclear technology to cope with booming demand for electricity.
"There's going to be some saber rattling" going into the week, "which could make it a bit tougher, especially with regards to the headlines that we may see around Iran's nuclear issue," said Steve Goldman, market strategist at Weeden & Co., in Greenwich, Connecticut. "It will make for some skittishness as we approach the deadlines."
Investors worry that if the dispute with Iran escalates, then U.S. crude oil futures prices — down 9 percent from a record high of $78.40 a barrel on July 14 — could rocket back to that level or beyond. That would increase concerns about inflation, as well as cloud the outlook for economic growth and corporate profits.
A surge in crude oil prices could cause the Fed to resume its interest-rate increases, analysts said. On Aug. 8, the Fed paused and kept the federal funds rate target unchanged at 5.25 percent after a string of 17 rate increases that began on June 30, 2004.
On Friday, U.S. crude oil for September delivery rose $1.08, or 1.5 percent, to settle at $71.14 a barrel on the New York Mercantile Exchange. For the week, the price of NYMEX September crude fell 4.3 percent.
DUCT TAPE AND HOME SALES
Lowe's Cos. Inc., the No. 2 U.S. home improvement chain, will report quarterly earnings Monday before the U.S. stock market's regular trading session begins.
Analysts said investors will focus more on what Lowe's says about its outlook, with signs of a slowing housing market, following a five-year boom, continuing to stream in.
Only a handful of S&P 500 companies are scheduled to report results in the coming week, as earnings season winds down. Intuit Inc., the maker of the TurboTax software, will release earnings on Tuesday after the bell.
On the economic data front, investors will watch for the release of July existing home sales Wednesday. Economists polled by Reuters forecast that existing home sales slowed to a seasonally adjusted annual rate of 6.55 million units in July from June's pace of 6.62 million.
July new-home sales are scheduled for release Thursday, along with durable goods orders for July. The forecast, according to the Reuters poll, for new home sales: an annual rate of 1.100 million units in July, down from June's pace of 1.131 million.
Orders for durable goods, which include washing machines, refrigerators, cars, computers and other manufactured goods expected to last three years or more, are forecast to have declined 0.5 percent in July, after a gain of 2.9 percent in June, the Reuters poll showed.
"If you get some more weak economic numbers, then people will start to worry about growth maybe slowing too fast, and possibly a recession in 2007," said Elliot Spar, a market strategist with Ryan Beck & Co. in Shrewsbury, New Jersey.
Besides Bernanke's speech Friday, investors will take note Tuesday of remarks on the U.S. economy at separate events by two other Fed officials: Jack Guynn, the president of the Federal Reserve Bank of Atlanta, and Michael Moskow, the president of the Federal Reserve Bank of Chicago.
WALL STREET'S WINNING WEEK
Stocks rallied last week on back-to-back reports showing benign inflation readings on consumer and producer prices in July. Both the Standard & Poor's 500 Index and the Dow Jones industrial average hit three-month highs.
Friday capped the Nasdaq's longest winning streak since January, the S&P 500's longest winning run since March and the Dow's longest climb since May.
For the past week, the blue-chip Dow average gained 2.65 percent, while the S&P 500 rose 2.81 percent and the Nasdaq Composite Index jumped 5.16 percent.
For the year so far, the Dow is up 6.2 percent and the S&P 500 is up 4.3 percent, while the Nasdaq is down 1.9 percent.
Spar said there was room for a pullback because "the market is stretched here" following its recent climb.