Wall Street stocks may spend more time treading water during a holiday-shortened week as investors scour a fresh batch of economic reports for signs that US growth is gathering momentum and wait to get a peek at the crucial holiday shopping season.
After a red-hot rally in the stock market since the spring powered by expectations for rebound in the economy and corporate profits, investors are waiting for the next catalyst to propel the market further.
Reports on consumer confidence, orders for costly manufactured goods, personal income and spending, third-quarter US growth and the Federal Reserve's anecdotal take on the economy will give traders something to chew on.
"Barring an exogenous shock, we're going to continue to look to the economic data to get a sense as to whether this is going to be a sustainable economic rally in 2004 or a one-quarter, tax-induced head fake," said Richard Nash, chief market strategist at Victory Capital Management.
Still, more confirmation that the economy is regaining its health may not be enough to spur investors to resume their recent stock buying spree in a major way. The Standard & Poor's 500 index is already up nearly 18 per cent this year, and some market analysts are questioning whether stock prices already reflect a robust rebound.
"It's hard to call the market cheap at current levels," Mr Nash said.
Stocks spent last week eroding the gains made in late October and early November, leaving them barely changed over the past month. For the week, the S&P 500 and the Dow Jones industrial average both fell 1.4 per cent, and the Nasdaq Composite Index dropped 1.9 per cent.
Jitters over global security and the dollar's recent slide may also keep the market from making any real headway in the next few sessions, pinning stocks near the 2003 highs they hit earlier this month.
In addition, a shortened trading week could sap some of the significance from the market's near-term moves. US financial markets are closed on Thursday for the Thanksgiving holiday.
"It really is going to be a fairly quiet week," said Rick Meckler, president of investment firm LibertyView Capital Management.
Wall Street reopens for a shortened trading session on Friday. But many investors will be taking the day off, leaving trading floors with just a skeleton staff and trading volumes thinned, analysts said.
That may keep many money managers wary of making big decisions ahead of such a long period in which limited trading opportunities curb their ability to respond to market-moving events. Heightened geopolitical tensions in the Middle East after a spate of deadly bombings in Turkey, purported threats of violence from al Qaeda and more deaths of US soldiers in Iraq make the situation all the more dicey for investors.
"No one likes to go home either long or short over a four-day weekend, particularly with days when you have terrorist attacks," Mr Meckler said.
Investors will also want to wait until the days shortly after Thanksgiving - generally viewed as the unofficial start of the winter holiday shopping season - for hints on how strong consumer spending is likely to be during that key period.
Earlier this month, Wal-Mart Stores Inc. and Target Corp. offered cautious outlooks for the holiday season, dampening hopes that signs of economic strength would spur sales. Consumer spending is viewed as vital to a sustained economic recovery since it drives two-thirds of US growth.
Wall Street is scheduled to get an extremely light sprinkling of earnings news in the days ahead, with results due from farm equipment maker Deere & Co., tax preparer H&R Block Inc., soup maker Campbell Soup Co., and ketchup producer H.J. Heinz Co., among a handful of others.
Microchip production equipment maker Novellus Systems Inc. may briefly grab the spotlight when it issues its mid-quarter update after Monday's close.
In the week's economic news, The Conference Board's November consumer confidence index, due tomorrow, is expected to show modest gain to 85.0 from 81.1 last month, according to economists in a Reuters poll.
Those economists also predicted that durable goods orders, due in a report on Wednesday, rose 0.8 per cent in October, following a revised gain of 1.1 per cent the previous month.
Weekly jobless claims data will be particularly key after first-time claims for unemployment benefits fell more than expected on Thursday. Economists predicted claims in the week ended November 22 will total 360,000, which would be an increase from the 355,000 claims filed in the previous week.
Many investors are still anticipating an economic pickup in 2004, but expectations that growth can match the pace of the third quarter - when the economy grew at its fastest quarterly rate in about two decades - have waned a bit, said Lincoln Anderson, chief investment officer at LPL Financial Services.
"People are now somewhat skeptical of the earnings outlook going forward," Mr Anderson said. "The market is just going to stay here in volatile territory for a while until we really sort out what's going on with fourth-quarter earnings, and that's really more than a month away."