Stocks may come under pressure this week as investors sell shares at year's end to prepare for tax season. But crude oil prices, earnings outlooks and moves in the dollar will also be closely watched. Economic data on productivity and labour costs, producer prices and consumer sentiment are due and will be read for hints on the health of the economy and signs of inflation.
"What we're going to see this week is a continued focus on the dollar, oil and interest rates," said Fred Dickson, chief market strategist at D.A. Davidson & Co.
"And we're looking for some normal seasonal consolidation. Some of that comes as a result of tax selling or the fear of tax selling."
The Standard & Poor's 500 index climbed to the highest level in more than three years this week, so investors may sell stocks to book gains or losses for their taxes as the calendar year draws to a close.
The US dollar, which fell to yet another record low against the euro on Friday, has spooked markets in recent weeks. So investors will continue to monitor the currency's moves.
A weak dollar can translate into higher sales and profits for US firms that do business abroad, but it can also make US stocks unattractive to foreign investors.
For the week, stocks rose. The blue chip Dow Jones industrial average gained 0.67 percent, the broad Standard & Poor's 500 index rose 0.72 percent, and the tech-laced Nasdaq Composite Index climbed 2.19 percent.
For the year so far, stocks also are higher. The Dow is up 1.32 percent, while the S&P 500 is up 7.13 percent, and the Nasdaq is up 7.22 percent.
As companies close the books on two months in the quarter, earnings outlooks are expected to start trickling in and may provide fuel for market moves.
Technology bellwether Texas Instruments Inc is scheduled to issue a fourth-quarter update on Tuesday. Seagate Technology Holdings, a maker of hard disk drives, will also release an update for its second quarter.
Regional telephone company BellSouth Corp, restaurant operator Yum Brands Inc, and Cisco Systems Inc are slated to brief Wall Street analysts during the week.
Pharmaceutical company Merck & Co Inc and energy company Dynegy Inc will provide financial outlooks for 2005 on Wednesday.
Investors will scrutinise earnings from companies, including the nation's largest grocery chain Kroger Co and chip maker National Semiconductor Corp.
Economic reports due this week that will give a read on inflation include November's US Producer Price Index, which measures prices received by farms, factories and refineries, as well as data on productivity and labour costs.
The Labour Department will release revised third-quarter data on productivity and unit labour costs on Tuesday.
The Producer Price Index report is scheduled for Friday. The overall PPI for November is forecast to gain 0.2 percent, while the core PPI, which excludes volatile food and energy prices, also is expected to rise 0.2 percent, according to economists polled by Reuters.
The Federal Open Market Committee, the rate-setting arm of the US Federal Reserve, is scheduled to meet on December 14.
Other economic data that may influence stock trading includes weekly jobless claims on Thursday and the University of Michigan index measuring consumer sentiment for December, due on Friday.
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