Stock investors will watch housing starts, CPI and other data next week for signs that hopes for economic recovery will not turn out to be false. If recent weeks' activity is any indication, stocks may stay in a narrow trading range, as recovery hopes have been met with concern about an uncertain job market, rising gasoline prices and higher borrowing costs.
The three major US stock indexes ended just slightly higher for the week, even though the Dow Jones industrial average broke into positive territory for the year for the first time since early January. The benchmark S&P 500 is up 39.86 percent since the 12-year closing low of March 9, and investors have been eager for more definitive signs that the recovery is going to be strong enough to sustain a rebound in corporate profits, which probably would underpin stronger gains in the market.
Besides data on construction of new housing, which has been among the weakest parts of the economy, investors will scrutinise readings on inflation at the wholesale and consumer level, when the Producer Price Index and the Consumer Price Index for May are released next week. Wall Street also will note the numbers on industrial production and capacity utilisation as well as weekly initial jobless claims.
With oil prices back above $70 a barrel, inflation worries could hinder the Federal Reserve's efforts to end the recession, pushing up interest rates and delaying any recovery. On Friday, the Dow Jones industrial average gained 28.34 points, or 0.32 percent, to 8,799.26. The Standard & Poor's 500 Index gained 1.32 points, or 0.14 percent, to 946.21. The Nasdaq Composite Index dropped 3.57 points, or 0.19 percent, to 1,858.80. For the week, the Dow advanced 0.4 percent, the S&P 500 added 0.7 percent and the Nasdaq rose 0.5 percent.
For the year, the blue chip Dow average is up 0.26 percent. Concern about higher borrowing costs for businesses and consumers mounted this week as the benchmark 10-year US Treasury note's yield briefly touched 4 percent after Wednesday's auction of 10-year notes.
Making the week's outlook even more complicated is the scheduled quarterly expiration of four different types of June equity futures and options contracts. The event, analysts said, could create greater volume and volatility as investors close out their positions.
Resource and technology shares have led gains in the market's recent rise, and while the run up in oil prices has sparked some concern about inflation, it has given the energy sector a big lift. US crude oil settled at $72.04 on Friday, down 64 cents on the day. However, oil is up sharply from its low of $32.40 in December.
Investors will get a clearer picture of inflation with producer price data on Tuesday, followed by consumer price data on Wednesday. Housing starts are also expected on Tuesday, along with industrial production figures. The Producer Price Index is expected to increase 0.6 percent month over month in the May headline number, following a gain of 0.3 percent in April.