Stocks May Flatten on Fewer Recovery Signs
U.S. stocks look set to revolve around their current levels this week, below longtime highs set in late January and mid-February, as the nearly yearlong rally shows more signs of floundering.
Investors are focusing on jobs and consumer spending data for pointers on the economy’s strength, as the fourth-quarter earnings season tails off.
“The payroll employment number on Friday is going to be important because we’re trying to get a sense that job growth is going to start increasing,” said Benjamin Pace, managing director at Deutsche Bank Private Wealth Management.
The government’s monthly employment report is expected to show 125,000 new nonfarm jobs were created in February, while the unemployment rate stayed steady at 5.6%.
Sluggish job growth has disappointed some investors in recent months, feeding doubts that the economy is fully on the road to recovery.
A strong fourth-quarter earnings season gave the nearly yearlong rally, which started in mid-March 2003, another burst of fuel. But now investors are struggling to see where the next impetus for stock gains will come from.
This week leaves investors in almost a vacuum for corporate earnings news. The fourth-quarter reporting season is winding down and it’s a little too early for pre-announcements for the first quarter.
Retailers once again dominate the ranks of those releasing their quarterly earnings scorecards, just as they did in the last week. On Wednesday, Costco Wholesale Corp., the largest U.S. warehouse club operator, will report its fiscal second-quarter results, and Toys R Us, the largest U.S. toy retailer, will release its fourth-quarter earnings.
On the economic data front, a report on personal income and spending for January will kick things off. That report is scheduled for release today. Personal income is expected to rise by 0.5%, while personal consumption or spending is forecast to rise by 0.4%, according to economists polled by Reuters.
“What we’re looking for there is a sense that the consumer is not falling off dramatically,” Pace said. “Because the consumer dominates capital spending, we can’t have the consumer go to zero or negative because GDP will slow down precipitously.”
Today also will bring the Institute for Supply Management’s report on its manufacturing index, expected to show a reading of 62 in February, down slightly from 63.6 last month.
U.S. car and truck sales for February are due on Tuesday.
On Wednesday, there will be mortgage and refinancing data, plus the ISM’s non-manufacturing, or service-sector, index.
Thursday brings weekly initial jobless claims, followed by the more detailed February employment report Friday.
