Stock market rallies need regular doses of good news to sustain investor enthusiasm and keep stocks rising. With few companies reporting earnings and little economic data in the week ahead, the push to Dow 11,000 could take some time.
After five weeks of gains, the major indexes finished last week mixed — not necessarily a sign that the recent rally has run its course, but that investors are consolidating their gains for a likely push higher before year’s end.
That push may need to wait a week, however. The economic data coming out this week is relatively minor, and there’s more than a month to go before earnings season begins again in earnest. There will be little news for investors to trade off of, which will make a sustained upward move very difficult.
Last week started with the Dow Jones industrial average just 68.38 away from 11,000, a psychologically important mark for the general public, though one that’s not held in as high regard on Wall Street. Yet as strong economic data came in, stocks fell as investors feared the Federal Reserve would continue raising rates as long as the economy remained healthy.
For the week, the Dow, which now stands nearly 123 from 11,000, lost 0.49 percent and the Standard & Poor’s 500 index lost 0.25 percent. The Nasdaq gained 0.46 percent as technology shares and small-cap stocks gained traction toward week’s end.
Consumer sentiment, factory orders
The week’s economic data is likely to give investors little substantial insight into the economy. On Monday, the Institute for Supply Management releases its index for the service sector. For November, the index is expected to come in at 59.3, down from a 60 reading in October.
On Friday, the University of Michigan’s consumer sentiment index for December is due. The preliminary index is expected to show a reading of 84, up from 81.6 in November. Lower gas prices and a relatively warm winter could help push that index even higher.
Finally, the Commerce Department will report on October’s factory orders, which are expected to have risen 1.5 percent after a 1.7 percent drop in September due to disruptions from the Gulf Coast hurricanes.
Retailers' reports — seasonal insight?
There are few major companies reporting earnings this week, but a couple of major retailers could provide some insights into the sector as they discuss past earnings as well as the current holiday shopping seasons.
Sears Holding Corp. has suffered a malaise along with the rest of the retail sector. The stock is off 26.9 percent from its 52-week high of $163.50 on July 20, closing Friday at $119.50. The company is expected to post a profit of 28 cents per share when it reports earnings Tuesday morning, down from 59 cents a year ago.
On Thursday, discounter Costco Wholesale Corp. is expected to report earnings of 44 cents per share, up from 40 cents per share a year ago. The stock has fared better than Sears, up 24.9 percent from a 52-week low of $39.48 on April 22. Costco closed Friday at $49.34.
Investors will also get a fresh gauge on the housing market when Toll Brothers Inc. reports earnings Thursday. Despite a wave of investor interest in housing stocks, Toll Brothers has dropped 39.3 percent from its 52-week high of $58.67 on July 20, closing Friday at $35.63. The home builder is expected to earn $1.63 per share, up from $1.11 per share last year.