US stock investors will likely take their cues from the bond market's moves in the week ahead as Wall Street emerges from North America's biggest blackout ever and drifts into the lazy, hazy days of summer.

Rapidly rising interest rates, fueled by expectations of an economic rebound, have fanned fears that higher borrowing costs could hinder the still fragile economic recovery.

That means good economic news could potentially be bad news for stocks next week as investors brace for a fresh batch of reports on the housing sector, consumer sentiment and the labour market.

"In the absence of earnings numbers that we can get our teeth into, the focus is going to be on the economy and the response of interest rates to economic numbers," said Hugh Johnson, chief investment officer at First Albany Corp.

Hopes that the economy is finally recovering from its slump helped catapult the stock market higher this spring, pushing the Standard & Poor's 500 index up more than 20 per cent from its 2003 closing low hit on March 11.

But stocks stalled out in mid-June, partly due to the sharp rise in interest rates, and market analysts see little on the horizon to help shake the market out of its summer doldrums.

With many investors taking days off for summer vacations, trading volumes have dried up, leaving stocks to wander aimlessly in the tight range they have been stuck in for about two months.

"Let's not forget this is the summer," Mr Johnson said. "The kind of trendless and volatile tone we've seen for the last few days, almost directionless, is likely to prevail."

Stocks managed to eke out gains this week, with the S&P 500 and the Dow Jones Industrial Average both up about one per cent, and the Nasdaq Composite Index up about 3.5 per cent.

Trading volumes were among the lowest of the year on Friday after the blackout left many trading floors functioning on emergency power and struggling with hobbled transportation systems.

Earnings reports from retailers like Toys R Us, Lowe's Cos. and Gap, as well as blue-chip names like Hewlett-Packard and Home Depot could catch investors' attention in the week ahead.

But the flood of earnings reports has largely slowed to a trickle. Stock investors are now largely focused on finding out whether the long-awaited recovery in the economy and corporate profits is actually under way.

For that reason, the University of Michigan's gauge of consumer sentiment, which was postponed on Friday because of the power outages that darkened much of the US Northeast and parts of Canada, will likely show up on investors' radar screens.

Consumer spending drives about two-thirds of US economic growth. Investors worry that the rebound could falter if Americans decide to snap their wallets shut.

Economists in a Reuters survey expect the preliminary Michigan report for August to show consumer sentiment nudged up to 91 from 90.9 in July.

Data on the housing sector will also be key, since it has been an area of strength in an otherwise sluggish economy.

Demand for mortgage loans has already cooled with yields on long-dated Treasuries, which dictate mortgage rates, up sharply. The benchmark 10-year Treasury note yield ended the week near 4.53 per cent after hitting a one-year high on Thursday, pre-blackout, near 4.67 per cent.

Investors' belief that the economy is picking up and the perception that that acceleration has eased the risk of falling prices has helped push rates up over the last two months.

The government is expected to report tomorrow that housing starts slipped to an annualized pace of about 1.79 million in July from 1.80 million in June, according to economists polled by Reuters.

The National Association of Homebuilders' housing market index for August, due on Monday, and the Mortgage Bankers Association of America's weekly mortgage market index on Wednesday also will garner attention.

"All eyes are going to be focused on the economic data and its impact on the bond market," said Rich Nash, chief market strategist at Victory Capital Management.

"The NAHB and the housing starts number on Tuesday might get a little more ink than normal just because of the rise in rates, and we're going to want to see if that has impacted the housing market."