Investors have lost some of their bravado when facing bad economic news.
Wall Street's mood deteriorated last week as investors began to question whether stocks' spring rally was premature. They were also stung by a Standard & Poor's warning about British government debt that raised concerns about how much money the U.S. government owes.
As stocks barreled higher starting in early March, investors were able to find signs of hope in reports that showed a still struggling economy. But they're uneasy going into this week, which will bring two reports on April home sales and the latest assessment of consumer confidence. They're also nervous about an expected June 1 Chapter 11 bankruptcy reorganization filing for General Motors Corp.
"There are some big, big, big issues going on right now," said Tommy Williams, president of Williams Financial Advisors in Shreveport, La. "I don't think any one of them are going away this summer."
The major indicators just managed to squeeze out gains last week. The Dow Jones industrials rose 0.10 percent, while the Standard & Poor's 500 index ended the week up 0.47 percent.
The first test of the market's ability to build on those numbers comes Tuesday, when the Conference Board releases its May consumer confidence index. The reading should provide some insight into consumers' willingness to spend.
But Ron Weiner, president and chief executive of RDM Financial in Westport, Conn., says that while any positive news about consumers would be welcome, the market is likely to have just a short-term upward blip.
"We want the consumer to be out there, we want them to spend," Weiner said. "For the most part, however, we don't see consumers going to pull us out of this economy because they are also paying down debt a the same time."
Investors are also mindful of the Commerce Department's disappointing retail sales report for April, which took the market by surprise May 13 and sent stocks plunging.
On Wednesday and Thursday, investors will get reports on sales of existing and new homes last month. A government report is also due on U.S. home prices during the first quarter of 2009.
The housing data could be a big force in shaping investors' attitudes. A housing recovery is crucial to helping consumers feel more confident and to allow banks to put aside some worries about eroding asset values.
Wall Street has been trying to get a read on the housing market for months, and responded enthusiastically to any signs that the slump is leveling off. Stocks surged more than 3 percent on May 4 following unexpected increases in pending home sales and construction spending. But a big inventory of unsold homes and record foreclosures are swallowing much of the demand, making it hard for prices to stabilize.
"We are getting to the point of the year where we are getting into the peak home sales season," said Kevin Shacknofsky, co-portfolio manager of the Alpine Dynamic Dividend Fund in Purchase, N.Y. "The numbers now will be far more important ... it's summer time."
Analysts say more stabilization in the housing industry is needed for a recovery to occur.
"Some carpenters are out of work and some home builders are struggling, but we can't right this ship if we don't run off that inventory," Williams said.
Investors are also waiting anxiously for General Motors' June 1 deadline to complete its restructuring or head into Chapter 11 bankruptcy reorganization. To avoid Chapter 11, the automaker needs to have concessions ratified by union workers, and it needs to reach an agreement with unsecured bondholders to wipe out $27 billion in debt. But bondholders have been balking.
Last week, dozens of members of Congress told the Obama administration to slow down the restructuring of General Motors and Chrysler, because they're worried the process could cost tens of thousands of jobs.
"I think everybody is expecting a (GM) bankruptcy," Shacknofsky said. "We could get a positive surprise if they can come to some sort of negotiation. ... The market would probably like that."