NEW YORK – Stocks may come under pressure next week as investors sell shares at year's end to prepare for tax season. But crude oil prices, earnings outlooks and moves in the dollar will also be closely watched.
Economic data on productivity and labor costs, producer prices and consumer sentiment are due and will be read for hints on the health of the economy and signs of inflation.
"What we're going to see next week is a continued focus on the dollar, oil and interest rates," said Fred Dickson, chief market strategist at D.A. Davidson & Co.
"And we're looking for some normal seasonal consolidation next week. Some of that comes as a result of tax selling or the fear of tax selling."
The Standard & Poor's 500 index (search) climbed to the highest level in more than three years this week, so investors may sell stocks to book gains or losses for their taxes as the calendar year draws to a close.
The U.S. dollar, which fell to yet another record low against the euro on Friday, has spooked markets in recent weeks. So investors will continue to monitor the currency's moves.
A weak dollar can translate into higher sales and profits for U.S. firms that do business abroad, but it can also make U.S. stocks unattractive to foreign investors.
For the week, stocks rose. The blue-chip Dow Jones industrial average (search) gained 0.67 percent, the broad Standard & Poor's 500 index rose 0.72 percent, and the tech-laced Nasdaq Composite Index (search) climbed 2.19 percent.
For the year so far, stocks also are higher. The Dow is up 1.32 percent, while the S&P 500 is up 7.13 percent, and the Nasdaq is up 7.22 percent.
As companies close the books on two months in the quarter, earnings outlooks are expected to start trickling in and may provide fuel for market moves.
Technology bellwether Texas Instruments Inc. (TXN) is scheduled to issue a fourth-quarter update on Tuesday. Seagate Technology Holdings, a maker of hard disk drives, will also release an update for its second quarter.
Economic reports due next week that will give a read on inflation include November's U.S. Producer Price Index, which measures prices received by farms, factories and refineries, as well as data on productivity and labor costs.
"Productivity and labor costs will be a focus because they are two components that go into the outlook for inflation, and that, in turn, affects the Fed's posture," said Lawrence Horan, director of research at Parker/Hunter Inc. "The debate now is: Are they going to accelerate their rate increases next year?"
The Labor Department (search) will release revised third-quarter data on productivity and unit labor costs on Tuesday.
The Producer Price Index (search) report is scheduled for Friday. The overall PPI for November is forecast to gain 0.2 percent, while the core PPI, which excludes volatile food and energy prices, also is expected to rise 0.2 percent, according to economists polled by Reuters.
In October, the overall PPI rose 1.7 percent and core PPI gained 0.3 percent.
The Federal Open Market Committee, the rate-setting arm of the Federal Reserve (search), is scheduled to meet on Dec. 14.
Other economic data that may influence stock trading includes weekly jobless claims on Thursday and the University of Michigan index measuring consumer sentiment for December, due on Friday.
Price gyrations in the oil market will continue to command the attention of stock investors, who worry about the effect of high energy costs on consumers and corporations.
Crude oil prices have fallen more than 20 percent from the $55.67 record struck on Oct. 25, but some see them remaining at historically high levels.
"The oil phenomenon is not going to go away for a long time," said Ozan Akcin, chief market strategist, Puglisi & Co. "If you see a solution to Iraq, they could fall. But if you don't, speculators will continue to speculate on the supply and demand situation and prices will likely remain near where they are today."
And historically, crude oil prices tend to rise in the winter, boosted by demand for home heating oil, Akcin said.