With the Federal Reserve open to taking a break in its campaign of interest-rate hikes, US stock investors will be watching for signs of tame economic growth that would make a tightening pause all the more likely.
On Thursday, Fed Chairman Ben Bernanke set the stage for a break in rate increases by saying policymakers may pause even if the risks to the Fed's objective of keeping inflation under control are not entirely balanced. So investors may be heartened by the slightest signs of moderation in growth.
This week's calendar is loaded with key economic indicators, beginning on Monday with the March reading on the core personal consumption expenditure price index, one of the Fed's favourite inflation gauges, and wrapping up with Friday's report on April nonfarm payrolls.
Monday's agenda includes the Institute for Supply Management's report on its manufacturing index for April, forecast to dip to 55 from 55.2 in the previous month.
Tuesday brings April automobile sales, with car figures forecast to inch up slightly, while truck sales are expected to dip.
Wednesday's reports include data on factory orders and the ISM's index on the service sector.
The bulk of retailers will report April same-store sales on Thursday. Data on productivity and unit labour costs in the first quarter also will be released on Thursday.
ACCENT ON JOBS: Among the most important reports will be Friday's data on non-farm payrolls, the unemployment rate and average hourly earnings.
"If unit labour costs are tame and unemployment comes in 'in line,' then 'the-Fed-is-pausing' camp gets a lot of credence," said John Forelli, senior vice president at Independence Investment in Boston.
Economists polled by Reuters forecast that US nonfarm payrolls added 200,000 jobs in April, compared with 211,000 in March. The unemployment rate is seen steady at 4.7 percent. Average hourly earnings are expected to increase 0.3 percent, compared with a gain of 0.2 percent in the previous month.
HEALTH CARE EARNINGS ON CENTER STAGE: The bulk of first-quarter earnings have already been disclosed, with Wall Street analysts agreeing most companies defied expectations of a slowdown. But some sectors still have several key components set to reveal their results this week.
Energy's integrated heavyweights reported this week, but smaller producers like Williams Cos. Inc and Kerr-McGee Corp will post results on Thursday.
Quarterly scorecards from health insurers Humana Inc and Cigna Corp will be under scrutiny this week following competitor Aetna's disappointing earnings, which drove its shares down more than 20 percent on Thursday.
Investors will get a broad snapshot of the consumer sector with companies set to report earnings this week. Dow component Procter & Gamble Co, the owner of brands like Crest, Pampers and Tide; Whole Foods Market Inc, the top US organic food retailer, and cosmetics maker Estee Lauder Cos. Inc are just some of the household names on tap.
One industry likely to disappoint is poultry. Tyson Foods Inc, the No 1 US meat processor, which reports on Monday, announced preliminary results last week that showed a much wider-than-expected quarterly loss. Tyson also cut its full-year outlook due to the bird flu crisis overseas. Pilgrim's Pride Corp, the No 2 US poultry producer, will report on Wednesday. Russia, the top importer, revoked import licenses for poultry.
DOW HITS SIX-YEAR HIGH: The Dow Jones industrial average hit several fresh six-year highs this week. It could touch another peak if blue chip Verizon Communications Inc, which is set to report earnings on Tuesday, beats forecasts.
During Friday's regular session, the Dow climbed as high as 11,417.66 - another six-year high. At the closing bell, though, the Dow was down 15.37 points, or 0.14 percent, to end Friday at 11,367.14. The broad Standard & Poor's 500 index was up just 0.89 of a point, or 0.07 percent, to finish at 1,310.61. The Nasdaq Composite Index fell 22.38 points, or 0.95 percent, to close at 2,322.57.
For the week, the Dow rose 0.17 percent, while the S&P 500 dipped less than 0.05 percent and the Nasdaq fell 0.87 percent.
While the performance may look lackluster, investors cannot afford to be asleep at the wheel.
"You're starting to see some rotation in the market even though the indexes aren't going anywhere," said Sam Rahman, portfolio manager at Baring Asset Management Inc "There's a tug of war between the cyclical stocks like commodities, energy and manufacturers versus the stable growth stocks like banks, technology, health care and consumer goods, and how that shakes out will determine where the stock market goes."
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