US stock investors may be looking for direction this week as they digest the idea of an imminent interest-rate hike by the Federal Reserve and wonder how much rates will go up and when.
The market fixation on interest rates has in large part overshadowed a stellar corporate earnings season.
"May is a tough month for the stock market generally because by the time we get to mid-May, analysts have processed the earnings news," said Frederic Dickson, senior vice president, of D.A. Davidson & Co.
"I think this week is going to be another roller coaster with volatile bounces but little directional movement," Dickson added. "The Dow 10,000 level is going to be a number investors will stick on. We may test that low point this week."
Worries that a rate hike could come in the next few months and that the Fed could raise rates drastically have weighed on the market for the past few weeks.
This week, the Dow Jones industrial average fell 1.1 per cent, the Nasdaq Composite Index shrank 0.1 per cent, and the Standard & Poor's 500 index dipped 0.8 per cent.
A report showing US employment surged for a second straight month during April, pushed stocks lower on Friday as it raised speculation that higher rates could come as early as June.
"Basically, we're seeing a shift from a discussion of timing to a discussion of magnitude," said Brian Bush, director of research at Stephens Inc. "Until the market gets some sense of how fast the Fed will increase interest rates, it's going to be hard for the stock market to stage a sort of consistent advance."
The Labour Department data said the United States added another 288,000 workers to payrolls, as jobs were created in nearly every sector at a pace that easily beat expectations. It also said the nation's unemployment rate dipped to 5.6 per cent.
Wall Street had expected 173,000 new jobs would be created in April and the unemployment rate would be flat at 5.7 per cent.
Investors are still keeping a look out for more signs of inflation, casting a keen eye on economic data and oil prices.
This week the Labour Department will release information on prices, with the US Producer Price Index coming on Thursday and the Consumer Price Index, the most widely used gauge of US inflation, coming on Friday.
Economists polled by Reuters are expecting April's overall PPI and CPI to gain 0.3 per cent each, while core PPI and core CPI, which exclude volatile food and energy prices, are forecast to rise 0.2 per cent each.
"I would say the focus in the market right now is on interest-rate-moving data... (so) the focus is probably going to be on price data," said Subodh Kumar, chief investment strategist at CIBC World Markets. "To the extent that oil prices move above $40, or if they stay (near there) for a long time, that will make people more nervous about inflation and pricing. Markets will be watching the price of energy closely."
US crude oil futures hit $40 a barrel on Friday morning, their highest level since the Iraqi occupation of Kuwait in 1990, as the violence in the Middle East raised fears over sabotage and supply disruptions. On the New York Mercantile Exchange, crude oil for June delivery settled at $39.93.
The reporting season is winding down, but key scorecards are expected this week from Cisco Systems Inc., the world's largest maker of equipment that directs internet traffic; computer maker Dell Inc.; entertainment conglomerate Walt Disney Co., and Wal-Mart Stores Inc., the world's largest retailer.
Investors are also watching the geopolitical situation as events in Iraq and other parts of the world have raised uncertainties that have carried over to the stock market.
"So far, earnings news has been sensational, economic data has been terrific, but the offset to this is news from Iraq, which is just one bad story after another," D.A. Davidson's Dickson said. "We describe the market as a tug of war between strong economic data and accelerated earnings, being offset by continued negative surprises coming from Iraq, and possibly a creeping fear of inflation."