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Data on Manufacturing, Joblessness Expected

Investors banking on an economic rebound sometime in the year ahead have hungrily snapped up stocks in recent months, but this week’s economic data could test their faith.

The broad Standard & Poor’s 500 index has sprinted about 20% higher since it hit its 2003 low in mid-March, powering upward amid only sporadic signs that ailing U.S. growth and corporate profits are on the mend.

This week, investors will look to reports on the manufacturing sector, as well as factory orders, productivity and the government’s monthly employment report, to get a sense of how the economy is faring.

“People are trying to find any glimmer of a pickup in the economy,” said John Forelli, portfolio manager at Independence Investments. “We need economic confirmation that the recovery is here, and we haven’t seen that yet. We’ve just seen speculation.”

Speculation has been enough for investors hoping that the economy, freed from the shadow of the war in Iraq and bolstered by extremely low interest rates and a $350-billion tax cut package, will return to health soon.

The S&P; 500 stormed to its highest close since last July on Friday, while the blue-chip Dow Jones industrial average rose to its highest finish so far this year. Both indexes racked up a third straight month of gains in May, their first such streak in about a year and a half.

The technology-laden Nasdaq composite index ended at its highest level in about a year Friday. It also notched a fourth straight month of gains, a feat it had not accomplished since the autumn of 1999.

For the year, the Dow is up 6.1%, the S&P; 500 is up 9.5% and Nasdaq is up 19.5%.

Given the market’s heady gains, investors may pause to question whether stocks have run too far, too fast.

“We’re going through this emotional battle between fear and greed,” said Charles White, president of investment firm Avatar Associates. “Investors are weighing [between] watching this rally and wanting to jump in against fear that they’re buying at the top.”

Nevertheless, market sentiment remains upbeat and investors are quick to focus on the bright spots in the economic data, analysts said.

Earnings reports are due from a few technology companies, including electronic chip maker National Semiconductor Corp. Upscale retailer Neiman Marcus Group Inc. also will issue its quarterly scorecard.

But with the light earnings calendar this week, investors will be listening for mid-quarter updates, including from Intel Corp., the world’s largest computer chip maker.

The week’s economic data, however, probably will steal the spotlight, offering key glimpses of the economy in the wake of the Iraq war. For now, investors may be willing to forgive anything but the most devastating economic news, analysts said.

The Institute for Supply Management’s survey on U.S. manufacturing activity, due today, is expected to show a rise to 48.6 in May from 45.4 in April.

The government’s monthly payrolls report, due Friday, is expected to show the economy lost 39,000 jobs in May while the unemployment rate ticked up to 6.1% from 6.0% in April.

Below is a brief look at some of the key economic events scheduled for this week.

Today: Commerce Department reports on construction spending; Treasury bill auction; Institute for Supply Management releases its report on the manufacturing sector during May; Federal Communications Commission votes on media ownership rules.

Tuesday: House Financial Services subcommittee hearing on the accounting treatment of employee stock options; automakers announce their sales figures for May.

Wednesday: Labor Department reports on productivity and costs, first quarter, revised.

Thursday: Labor Department reports on weekly jobless claims; Commerce Department reports on factory orders for April; mortgage company Freddie Mac reports on mortgage rates; the nation’s largest retailers announce their sales figures for June.

Friday: Labor Department reports on employment for May; Federal Reserve reports on consumer credit for April.