Market Snapshot
Dec. 5, 2009, 6:01 a.m. EST · Recommend (5) ·
SAN FRANCISCO (MarketWatch) -- U.S. stocks in the week ahead face another round of reports on how consumers are dealing with tough but recently improving job prospects, information that could swing a market shown to make sudden reversals on minor shifts in sentiment.
A push by Congressional Democrats to pass a new jobs-spending package, combined with weekly jobless claims, will give investors a fresh sense of whether the 15.4 million unemployed in the U.S. will still soon start to find work.
Then, retail sales and consumer sentiment reports, plus a handful of quarterly results from retailers including Costco Wholesale Corp. /quotes/comstock/15*!cost/quotes/nls/cost (COST 59.19, +0.17, +0.29%) , will show whether individuals are able to start spending again. And Federal Reserve Chairman Ben Bernanke speaks Monday.
U.S. Week Ahead: Copenhagen and the MarketsInvestors will be listening carefully to Ben Bernanke when he addresses the Economic Club on Monday. Plus, how will the markets react to news in Copenhagen? Stacey Delo reports on the week ahead and rounds up what to watch for in Washington.
Stock strategists said factors that dominated trade in the past week -- optimism about the improving job market, mixed reads on consumers' buying abilities, and nervousness on the market's 66% rise since early March -- are likely to crop up in the week ahead.
"We're trying to come back to normalcy, with this constant fear of the next shoe to drop," said Erik Davidson, managing director of investments for the western U.S. for Wells Fargo & Co.'s private bank unit.
Caution by investors looking to preserve gains has held the market from making a bolder move higher, say some analysts.
"It's been a long two years," Davidson said. "It's time for people to take a deep breath."
Plus, the market is wrestling with the downside of a recovering economy - the likelihood that the Federal Reserve may raise interest rates, now near zero percent, over the next year. Higher benchmark rates would raise borrowing costs and make the U.S. dollar more valuable, possibly curtailing gains in high-flying investments.
Stocks surged early after Friday's jobs report showed nonfarm payrolls dropped by 11,000 in November, blowing away expectations for a 100,000 drop. See story on jobs data.
But stocks gave up much of those gains by day's end, and even dropped into the red for a while, in part because a jump in the U.S. dollar sank commodities prices and stocks in natural resource firms.
For the week, notable for below-average volume, the Dow Jones Industrials Average /quotes/comstock/10w!i:dji/delayed (INDU 10,389, +22.75, +0.22%) gained 0.8%, the S&P 500 /quotes/comstock/21z!i1:in\x (SPX 1,106, +6.06, +0.55%) added 1.3% and the Nasdaq Composite /quotes/comstock/10y!i:comp (COMP 2,194, +21.21, +0.98%) advanced 2.6%.
The U.S. dollar ended the week 1.1% higher as measured by the U.S. dollar index /quotes/comstock/11j!i:dxy0 (DXY 75.73, -0.18, -0.24%) . Its nearly 16% drop this year has helped stoke the recent rally in stocks and commodities, in part by providing cheap credit to buy equities, oil, metals and emerging-markets currencies. Read more on the dollar.
Any of these factors could change investors' daily take on where they want to place their money - in stocks and oil, on the hope of more gains tied to a recovery, or in assets thought to preserve value while offering little yield, including bonds, gold and the dollar. Read more on twinned dollar, stock rally.
"The market has had a good move, it's one of these periods where anything could push it easily," said Andrew Brooks, head of U.S. equity trading at T. Rowe Price & Co.
At the end of the day, said Brooks, improving economic fundamentals will help propel stocks higher. But, he cautioned, "it will grind higher, it won't be a moon shot."
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