There isnt much left to happen to this market, in terms of the view of an expanding economy. It is generally agreed by everyone that the economy is improving. What isnt clear is whether earnings are improving at the same pace the market is. Thats the next big test for equities, said Rick Meckler, president of LibertyView Capital Management in New Jersey.
For the first full trading week in January, the S&Ps 500 rose 0.6% and the Nasdaq Composite climbed 1%, while the Dow Jones industrial average slipped 0.2%.
Investors may get a better sense of how quickly the central bank will reduce its market-friendly bond purchases from a number of Federal Reserve officials due to speak next week. A much weaker-than-expected December payrolls report on Friday raised new questions about both the strength of the economy and the aggressiveness of Fed stimulus.
Federal Reserve Bank of Atlanta president Dennis Lockhart is scheduled to speak at events on Monday and Wednesday, while Fed chairman Ben Bernanke is set to speak on Thursday. The Feds Beige Book is due on Wednesday.
A batch of December data will be released next week, with retail sales on Tuesday, the US Producer Price Index on Wednesday, the US Consumer Price Index on Thursday and housing starts on Friday. Another number to note on Friday will be the preliminary January reading on US consumer sentiment from the Thomson Reuters/University of Michigan Surveys of Consumers.
For the whole S&P 500, fourth-quarter profit growth is expected to have increased 7.7% from a year ago, while revenue is expected to have risen just 0.4%, Thomson Reuters data showed. The S&P 500 rose 9.9% in the fourth quarter of last year, while it jumped 29.6% for 2013, its best year since 1997.
Among other earnings to watch next week, General Electric is expected to report a spike in fourth-quarter profit on Friday with the help of the record $229-billion backlog of orders for jet engines, oil pumps and healthcare equipment.
American Express fourth-quarter results on Thursday are expected to beat estimates, helped by increased card spending and lower default rates among customers.
Retail stocks have been attracting increased options activity this week as major retailers came out with their disappointing holiday sales figures.
Investors will get more insight into the consumers state of mind next week as about 150 consumer-related companies are due to participate in the annual ICR XChange conference from Monday through Wednesday.
The annual gathering comes after many large US retailers slashed their earnings forecasts recently because of steep discounts they offered during the holidays to persuade reluctant consumers to buy.
I wouldnt judge the health of the economy off of brick-and-mortar retailers, said Paul Zemsky, head of asset allocation at ING Investment Management in New York. The economy was strengthening into the end of the fourth quarter, and there was sufficient growth to keep earnings growing and people buying the market.