Stocks are expected to bounce around their current levels this week, a little below their highs for the year, as investors wait for a signal that the economic recovery has reached a new level.
The focus also will turn to retail companies for guidance on the vital holiday season.
Blue-chip stocks dipped last week despite some encouraging jobs data, as leading retailer Wal-Mart Stores Inc. offered a lukewarm holiday profit forecast and investors dumped some technology stocks after the recent run-up.
"Over the past week, the economy began to catch up with the stock market," Gordon Fowler, chief investment officer at money manager Glenmede Trust Co., said in his latest market outlook.
Corporate earnings and capital spending are up, consumers are spending and companies are hiring again. "So how did the stock market react?" Fowler asked. "It yawned and looked back at the economy and asked, 'What took you so long?' "
The market has surged since hitting 2003 lows in March, leaving some investors concerned that much of the U.S. economic rebound is already factored into stock prices.
Investors are looking for the next piece of data that will drive the market higher. But the coming week is not likely to offer the conclusive proof of a booming economy that many demand.
Key data to be released this week include the consumer price index scheduled for Tuesday, which will give the latest read on inflation. Economists polled by Reuters expect a 0.1% rise in consumer prices for October, down from 0.3% the month before. A figure significantly above that would stimulate debate on when the Federal Reserve would start to ratchet up interest rates to cool off an overheating economy.
A report on housing starts due Wednesday will give insight into home builders' confidence that people will buy new homes and shed some light on demand for household goods.
Third-quarter earnings trail off this week, with only a few major companies presenting their latest scorecard, including retailers Toys R Us Corp. on Monday and Home Depot Inc. on Tuesday.
After leading store chains Wal-Mart and Target Corp. offered lukewarm profit forecasts for the vital holiday season last Thursday -- taking the stock market down a peg -- investors will be hoping for more robust outlooks on the mood of American shoppers, who have driven the economy's recovery so far.
Among other bellwether stocks, computer and printer giant Hewlett-Packard Co. reports Wednesday and entertainment conglomerate Walt Disney Co. reports Thursday.