For stock market, jobs report looms large

U.S. stocks could do well this week if monthly jobs data, due out Friday, and corporate results paint a more promising picture of the recovery.

The Standard & Poor’s 500 index has been stuck in recent days amid recent weak economic data and disappointing outlooks from companies including technology firms Nvidia Corp. and Symantec Corp.

The tech-heavy Nasdaq composite had the poorest performance of the three major indexes last week, and activity in the options market points to more volatility in the tech sector this week.

Among companies expected to report quarterly earnings this week are Procter & Gamble Co. and Clorox Co., whose results could give another glimpse into the strength — or weakness — of consumer spending.

But the Labor Department’s nonfarm payrolls report for July, due Friday, looms large. Sluggish job growth is considered the biggest hurdle to advances in the economy and stock market.

Data released last Friday showed that U.S. economic growth slowed in the second quarter, and the June labor report released last month showed a fall in payrolls. Both of those raised concerns about the recovery for the rest of the year.

“We have been reducing our exposure to equities because we are concerned that a weaker economy is going to continue throughout the end of year,” said Joseph Battipaglia, a market strategist at Stifel Nicolaus in Yardley, Pa.

Analysts say a significant break above the S&P 500’s average for the last 200 days — currently about 1,114 — would be a bullish signal.

“The market has the potential to push higher again if we can get through the 200-day moving average,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Conn.

Chris Burba, a short-term market technician at Standard & Poor’s in New York, noted that the 200-day moving average has been nearly flat since late June, which supports the view that investors should be cautious.

The U.S. economy, recovering from the worst recession since the 1930s, has shown weakness in recent months, and corporate results for the second quarter have been mixed.

Earnings growth for S&P 500 companies in the second quarter is expected to be 36%, while revenue growth is estimated at 9.1%, according to Thomson Reuters data.

In other key economic data this week, the Institute for Supply Management’s manufacturing report, due out Monday, is expected to show growth for a 12th straight month.