What's ahead for the stock market

In a big week for the economy, reports are due on home prices, economic growth, manufacturing and auto sales. Apple may top $300; look for gold to close above $1,300.

By Charley Blaine Sep 24, 2010 8:24PM
Charley BlaineA big question for the stock market this past week was whether it could survive daily blasts of gloomy news about housing.

Mostly, the market did survive splendidly, and the week ahead may give investors some more cheer. "May" is the word to think about because there are still many people who believe stocks have become overbought.
It may not be a big week for earnings. But the economic reports will be very important, especially the weekly report on initial jobless claims and the Chicago Purchasing Managers report on manufacturing, both on Thursday. Decent reports, coupled with the end of both September and the third quarter, could give stocks a boost.

The past week was a surprising winner, the fourth straight week of gains. The Standard & Poor's 500 Index ($INX) surged above major resistance at 1,130 and ended the week at 1,149. That forced many traders to be buyers even if they're skeptical about the markets.

The Dow Jones industrials ($INDU)had two rallies of more than 145 points during the week and rose 2.4%. The Nasdaq Composite Index ($COMPX) had the best week of the major averages, rising 2.8%.

Plus,  Amazon.com (AMZN), Apple (AAPL), Autozone (AZO), Nike (NKE) and Cummins (CMI) hit new intraday highs.

Article continues below.
So, the September rally continued. In fact, it gained strength.

If the major indexes just break even next week, the Dow, up 8.4% this month, and S&P 500, up 9.5%, will have their best Septembers since 1939. The Nasdaq, sporting a 12.6% gain, will enjoy its best September performance since 1998.

And remember: September historically is the worst month for stocks.

There will be a lot of attention paid to Apple, whose shares ended the week at $292.32 and could push over $300.

In addition, gold topped $1,300 an ounce during the day on Friday but finished under that level. Watch to see if the metal can close above $1,300. 

Apple is up 38.7% this year; gold is up 18.4%.

If the dollar continues to drop, you can expect higher commodity prices. Wheat finished Friday at $7.20 a bushel and is up 33% this year.

The economy will push the market

Could the rally be derailed? Indeed it can, as MSN Money columnist Jim Jubak explained on Friday. He's worried about financial stocks, which have lagged the market for September and the third quarter.

But the coming week may not provide the trigger because the economic reports may not be so bad. Here's what's coming up:

S&P/Case-Shiller Home Price Index, due Tuesday. This measures home-price trends in 20 markets. Nomura Securities sees prices rising 2.5%, despite continued weakness in sales. But don't look for gains in the months ahead.

Consumer Confidence Index, due Tuesday from The Conference Board. IHS Global Insight believes the battering the economy took in July and August will push confidence to 50.

Gross domestic product, due Thursday from the Commerce Department. This is the last estimate for GDP for the second quarter, and it's expected to be a touch stronger. But it will still indicate that the U.S. economy is only growing at a 1.5% to 2% annual rate.

Initial jobless claims, due Thursday from the Labor Department. This will probably be around 465,000, the level reported for the week ended Sept. 18. A drop could boost the market. A deterioration could well unleash a wave of selling.

Chicago Purchasing Managers Index, due Thursday. This closely watched report measures manufacturing activity in the Midwest and fell in August. Nomura sees another decline but not nearly as large as the August decline.

August auto sales, due Friday from major manufacturers. Look for sales to run at an annualized 11.5 million units, up slightly from September, according to Edmunds.com.

Institute for Supply Management Manufacturing Index for August, due Friday. This will show continued -- but slowing -- growth. A bullish report will definitely move markets.

Personal income and spending, due Friday from the Commerce Department. This should improve in part because of some growth in wages and salaries and a boost from unemployment benefits.

Markets for the week



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A quiet week for earnings
The third-quarter earnings season doesn't get started until mid-October. So, the number of reports is modest.

Here's a rundown:

Monday: Payroll processor Paychex (PAYX) and circuit-board maker Jabil Circuit (JABL). The latter will offer a glimpse of where technology is headed.

Tuesday: Mattress-maker Sealy (ZZ) and drugstore chain Walgreen (WAG). Sealy's fortunes are directly tied to housing.

Wednesday: Discount retailer Family Dollar (FDO). The company will offer a picture of consumer intentions.

Thursday: Consulting firm Accenture (ACN) and spice-maker McCormick (MKC). McCormick has been a steady performer this year; shares are up 15.5%. It boosted guidance in June.

Also coming up: Hewlett-Packard and IPOs
Hewlett-Packard (HPQ) will hold an analyst meeting on Tuesday. Shares were higher on Friday after analysts at Barclay's predicted the company will boost its earnings guidance for fiscal 2011. It could be an opportunity to announce who will succeed Mark Hurd as CEO.

Initial public offerings will get a lot of attention after software maker SciQuest (SQI) raised $57 million at $9.50 a share in an IPO on Thursday. Shares closed Friday at $12.27, up 29%.

Among IPOs expected next week are: Amyris (expected ticker symbol AMRS), a biotech company that makes yeasts used in specialty chemicals; Campus Crest Communities (CCG), a real-estate investment trust that specializes in high-end student housing; Elster Group (ELT), a German maker of electric, gas and water meters; and China Wing Yang Wind Power Group (MY). The company is China's largest privately owned wind-turbine maker.

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