U.S. stocks look set for a bit of calm this week after a string of torrid trading sessions, as investors mark time before key production and jobs data.
Each of the major indexes has notched three consecutive weekly declines, falling close to 2004 lows, as investors seem unwilling to buy stocks before a consensus emerges on what the Federal Reserve will do with interest rates at its next meeting at the end of June.
"The last couple of weeks have been too exciting," said Alfred Kugel, senior investment strategist at Stein Roe Investment Counsel. "My guess is that we're going to be in a narrow trading range without much activity. I don't see anything that's going to move the market significantly in one direction or another until we get the employment report."
The government is set to release its May employment report on Friday, June 4, which many see as the key to anticipating the Fed's next step. Most economists now expect to see a small rise in interest rates at the Fed's June meeting, or its August meeting at the latest, with more to follow later in the year.
On Thursday, the market may get some clues on how the Fed plans to combat inflation with rate hikes when Fed Board Governor Ben Bernanke speaks in Seattle on the subject of "Gradualism: Why the Fed Tends to Move in Small Steps."
Bernanke, liked by investors for his clear and detailed explanations of complex subjects, may clear away some of the confusion that tends to follow the Fed's sometimes opaque comments.
No major data due
This week will be a quiet one for economic data. Highlights are housing starts data, scheduled for 8:30 a.m. ET on Tuesday, and the closely watched weekly initial jobless claims at 8:30 a.m. ET on Thursday.
Economists expect to see 1.99 million housing starts for April, down from 2.01 million the previous month, but still historically high, a testament to the strength of the housing boom that has underpinned the economic recovery.
Weekly initial jobless claims are expected to fall to 326,000 from 331,000 the week before, as the job market shows more signs of strength.
Leading indicators are also scheduled for Thursday at 10 a.m. ET, while the Philadelphia Fed survey is due at noon ET the same day.
However, many investors will see those numbers as mere markers on the way to the following week's gross domestic product data scheduled for Thursday, May 27, and the monthly jobs report the week after.
The week's earnings reports are dominated by retailers and technology companies.
On Monday, Limited Brands and Toys R Us report, followed on Tuesday by Dow components Home Depot and Hewlett-Packard. J.C. Penney and Applied Materials also release results on Tuesday. Clothing retailer Gap reports earnings on Thursday.
Seeking market strength
On Friday, the Dow Jones industrial average ended up 2.13 points, or 0.02 percent, at 10,012.87. The Standard & Poor's 500 Index fell 0.74 of a point, or 0.07 percent, to 1,095.70, while the technology-focused Nasdaq Composite Index dropped 21.78 points, or 1.13 percent, to 1,904.25.
But each of the major market benchmarks notched their third straight week of losses, bringing them near their 2004 lows, in a week when investors were preoccupied with worries about rocketing oil prices and rising interest rates. On Friday, crude oil hit a 21-year high at $41.56 a barrel.
For the week, the Dow lost 1 percent, the S&P 500 dipped 0.3 percent, and the Nasdaq dropped 0.7 percent.
All three big stock gauges also are in negative territory for the year. The Dow is down 4.22 percent so far in 2004, while the S&P 500 is off 1.46 percent and the Nasdaq is down 4.95 percent.
"We've had very strong earnings and an improving economy, and normally, you would have expected a stronger stock market in that environment," said John Davidson, president of Partner Re Asset Management Corp. "But the geopolitical risks, the deterioration of events in Iraq and the high price of oil have caused the markets to backtrack."