With Wall Street's recent decline erasing a significant chunk of stocks' gains this year, investors are starting to wonder when it will be time to start buying again.
It was clear that traders had grown a bit too optimistic that an end to the Federal Reserve's rate tightening was near. Two weeks ago, the Dow Jones industrial average came within 13 points of its best-ever close, but disappointing news from the Fed and a jump in consumer prices sent the index sliding 4.4 percent across six sessions.
Although the Dow now sits at a one-month low and the Standard & Poor's 500 and Nasdaq composite indexes are little changed for the year, analysts say it will take another solid round of inflation-friendly data before stocks can rebound and make a substantial move higher.
That might not come until next week's monthly employment report, said Russ Koesterich, senior portfolio manager at Barclays Global Investments. Just as job growth is considered a primary indicator of the economy's health, changes in hourly wages remain one of Wall Street's main concerns for inflation.
Not that next week will be completely devoid of data. The market will likely pay attention to Friday's personal spending and consumer confidence readings as the economy endures another month of record oil prices and nearly $3-per-gallon gasoline at the pumps. However, while those reports will suggest if escalating prices are straining consumer spending, they won't provide a direct gauge on the pace of inflation.
"We've had a very abrupt correction, down to an area that provided support for the market in February. You can expect a bounce here," Koesterich said. But, "if you get a modest bounce next week on low volume, you really can't attribute much to it."
Koesterich added that the projected upward revision to first-quarter gross domestic product growth on Thursday probably won't move the market unless there is an unusual change in the GDP's inflation component. He also noted that low trading volume throughout the recent selloff "calls into question whether this is the ultimate bottom or not."
Wall Street's tailspin left the major indexes down sharply this week. The Dow lost 2.08 percent, the S&P 500 slid 1.87 percent and the Nasdaq declined 2.22 percent.
The Commerce Department on Thursday issues its preliminary reading on first-quarter gross domestic product growth. Economists expect GDP growth will be revised to a 5.8 percent rate from an advance reading of 4.8 percent last month. However, the inflation component is forecast to remain at a 3.3 percent growth rate.
Then on Friday, the department releases data on personal income and spending for April. Income is projected to rise by 0.8 percent after a 0.5 percent increase in March; economists predict spending will grow by 0.7 percent, slightly higher than the 0.6 percent gain the previous month.
The consumer picture could be brightened further by the University of Michigan's consumer-sentiment index on Friday. The consumer-confidence measure is seen inching up 0.5 points to 79.5 for May following two months of declines.
Investors will also be watching for data on new-home sales from the Commerce Department Wednesday as rebounding mortgage rates continue to pressure housing demand. New home sales for April are expected to drop by 630,000 to 1.15 million.
Home-improvement retailer Lowe's Cos. reports its first-quarter earnings Monday morning, and analysts predict its profit will climb to 94 cents per share from 74 cents a year ago. Lowe's stock has given back all of its 2006 gains, dropping 9.6 percent from a February high of $69.30 to close Friday at $62.64.
Campbell Soup Co. also releases last quarter's results Monday morning. Its earnings are seen staying flat at 35 cents per share on a modest rise in sales. Campbell's stock has rallied sharply since February to reach its highest levels in more than five years, climbing 12.2 percent to finish at $32.65 on Friday.
Tech Data Corp. could give the technology sector some direction with its results on Tuesday morning. The nation's No. 2 computer supplier sits near its 52-week low after a weak March outlook hammered its stock, which ended Friday at $34.61, down 12.6 percent for the year. Analysts expect its profit to drop to 32 cents per share from 56 cents last year.
Investors have been eager for any clues on the Fed's plan for interest rates, even so much as to draw implications from remarks by any central bank official. Inflation or interest rate talk next week's remarks from Fed Chairman Ben Bernanke, Randall Kroszner or Federal Reserve Bank of Dallas President Jay Fisher _ not a voting member of this year's Federal Open Market Committee _ could spook investors or bring them the relief they have been awaiting. They're making separate appearances during the week; Bernanke will be testifying on Capitol Hill on Tuesday.