Wall Street Hopes Bull Has Long Legs

Stock investors next week should get more clues on whether the bull market has long enough legs to drive gains to year-end, as many market pros now expect.

Equities have been on a tear since the election returned Wall Street's preferred candidate, President Bush, to the White House, with no contested balloting or attacks.

The bull's groove is expected to extend into next week.

Yet the robust buying remains subject to the geopolitical aftershocks of Yasser Arafat's death — particularly if there is an effect on crude oil prices.

Earnings from a few remaining corporate bigshots, including Wal-Mart Stores Inc. (WMT), also will set the tone.

More reports on the U.S. economy's health will pour in, with the latest reading on inflation for October, data on U.S. factory activity, and leading economic indicators from the Conference Board all expected in the coming week.

The broad market, as measured by the Standard & Poor's 500 Index (search) , is up about 4.8 percent in November, putting it on track to be the largest monthly rise of 2004. On Friday, the S&P 500 struck a fresh three-year high. Even the lagging Dow Jones industrial average moved back onto positive ground for the year — for the first time since June.

"It will be important to see if the market follows the breakout strength of the last week-and-a-half," said Charles Blood, equity strategist at Brown Brothers Harriman. "It ought to be able to hold its own, and make some progress. Nothing in the data would suggest that there are some crucial numbers that would blow the market off course."

Tom McIntyre, chief portfolio manager at McIntyre, Freedman & Flynn, a Cape Cod, Mass., manager of around $125 million, said, "The market doesn't want to go down. You are going to see that continue because some money managers are running out of time. They are behind the averages. I think money is going to get put to work between now and the end of the year."

For the week, the blue-chip Dow gained 1.46 percent, the tech-laden Nasdaq Composite Index climbed 2.28 percent, and the S&P 500 rose 1.54 percent.

For the year, the Dow is up 0.8 percent, the Nasdaq is up 4.1 percent, and the S&P 500 is up 6.5 percent.

The quarterly earnings season winds down, with retailers' report cards the dominant trend in the coming week.

Four of the Dow's 30 components are on the earnings calendar. Wal-Mart, the discount king and the world's biggest retailer, and Home Depot Inc. (HD), the world's biggest home improvements retailer, are scheduled to report earnings before Tuesday's stock market open. After Tuesday's closing bell, computer and printer maker Hewlett-Packard Co. (HPQ) will release quarterly results.

On Thursday, Walt Disney Co. (DIS) is scheduled to report earnings after the closing bell.

Others with earnings on tap next week include: Lowe's Cos. Inc. (LOW), Home Depot's rival and the second-largest home improvement retailer, early Monday; department-store chain J.C. Penney Co. Inc. (JCP) early Tuesday; Applied Materials Inc. (AMAT), the world's largest maker of chipmaking tools, late Wednesday, and Gap Inc. (GPS), the largest U.S. specialty apparel retailer, late Thursday.

Much of the economic data on next week's menu covers last month. As a whole, it is not expected to send shock waves through the market.

On Tuesday, the Labor Department (search) releases the October Producer Price Index, a reading of inflation that measures what manufacturers pay for raw materials and unfinished goods. Economists polled in a Reuters survey forecast a median 0.5 percent rise in overall PPI for October, compared with a 0.1 percent increase in September.

Excluding volatile food and energy items, core PPI is seen rising 0.1 percent in October, compared with September's gain of 0.3 percent.

On Wednesday, the Consumer Price Index (search) for October will be released, also at 8:30 a.m. Economists surveyed by Reuters expect a median 0.4 percent rise in overall CPI for October, compared with a 0.2 percent gain in September. Excluding volatile food and energy items, core CPI is seen up 0.1 percent in October, compared with a 0.3 percent gain in the previous month.

October housing starts also are due Wednesday. The forecast calls for housing starts to rise to 1.975 million units in October, on a seasonally adjusted annual rate, from 1.898 million in September, according to a Reuters poll.

Also Wednesday, just before the stock market's opening bell, the Federal Reserve (search) will release industrial production and capacity utilization data for October. Economists in a Reuters survey predicted a median 0.3 percent rise in industrial production in October, compared with a gain of 0.1 percent in September. The capacity utilization reading is expected to be 77.4 percent in October, up a bit from 77.2 percent in September.

The week's final major data release will be Thursday when the Conference Board (search) will release its October index of leading U.S. economic indicators at 10 a.m. Economists polled by Reuters forecast a 0.1 percent dip in index of leading indicators last month, after a 0.1 percent dip in September.