Stock investors will be taking the US economy's pulse this week, searching for signs of a return to health and pondering prospects for corporate profits in the quarters ahead.
As the flood of corporate earnings reports slows to a trickle, Wall Street will find itself pelted by a barrage of economic data, including reports on retail sales, industrial production and inflation at the producer and consumer levels.
After a better-than-expected batch of first-quarter earnings, investors are now demanding proof that the economy is stabilising, said John Forelli, portfolio manager at Independence Investments LLC.
"There are sprinklings of evidence that it's happening, but no one's convinced yet," Mr Forelli said. "We should expect a better economy over the coming months just from the initial relief of getting the war behind us, but the question is the sustainability of that bounce back."
The Federal Reserve last week left US interest rates steady at four-decade lows, but warned of the potential for a significant drop in inflation, saying that meant the economy was in danger of weakness ahead.
It offered reasons to be optimistic, as well: The central bank hinted that it will be willing to keep interest rates low until the economy shows clear signs of stabilisation.
Still, with the Standard & Poor's 500 index up 16.6 per cent from its 2003 trough hit in mid-March, investors are cautious.
"The equity market has obviously had a great run-up. To go further you need to show that the economy is coming out of its funk," said Jon Brorson, managing director at Neuberger Berman.
"You can talk all you want about more cuts ... but big deal."
In coming weeks, the S&P 500 is likely to retest its 200-day moving average around 880, Mr Brorson added.
So far this year, the S&P 500 is up close to six per cent, the Dow Jones Industrial Average is up three per cent, and the Nasdaq Composite Index is up 14 per cent.
Most S&P 500 companies have beaten earnings estimates for the first quarter, raising hopes corporate profits are on the mend. Now investors are hanging on every word corporate America offers on its forecasts for earnings and sales.
Quarterly scorecards from retail heavyweights Wal-Mart Stores Inc., Target Corp. and J.C. Penney Co. Inc. will grab the spotlight this week, particularly after they and many other marquee names in the sector reported unexpectedly soft April sales.
Also on tap are results from No. 2 personal computer maker Dell Computer Corp., software maker Computer Associates and the world's biggest maker of semiconductor equipment, Applied Materials Inc., as well as drugmaker Schering-Plough Corp.
The weakness of the dollar, which last week plunged to a four-year low against the euro, could be another factor keeping stock prices in check amid worries it signals foreign investors are losing confidence in US assets, analysts said.
The government's retail sales report, due on Wednesday, will be among the week's highlights. One of Wall Street's biggest concerns throughout the economic slowdown has been that consumers - whose spending powers two-thirds of US growth - will snap their wallets shut amid growing joblessness and geopolitical tensions.
Economists on average are expecting the data to show retail sales rose 0.4 per cent overall and gained 0.1 per cent excluding automobiles in April, according to a Reuters poll.
April reports on consumer and producer prices could have particular significance, given the Fed's comments. The US Producer Price Index, last week showed a 0.6 per cent drop overall and a 0.1 per cent decline minus volatile food and energy prices in April.
While investors may brush off any lackluster data as still tainted by the conflict in Iraq, the recent buying spree is probably over for now, said Jeff Kleintop, chief investment strategist at PNC Advisors.
"I'd be surprised to see the market continue its recent pace," Mr Kleintop said. "All the big positives are behind us now and we're getting to into a seasonally weak period for the market."