What's ahead for the stock market

In a short week, stocks produced their fourth straight week of gains, with investors anticipating the first improvement in the U.S. jobs picture in 27 months.

U.S. payrolls did grow by 162,000 jobs in March, helped in part by hiring for the U.S. Census. But there were gains elsewhere in the economy, and many analysts see a brighter employment picture in the months ahead.

For stocks, it was a week for grinding. The best performer among the 30 stocks in the Dow Jones Industrial Average ($INDU) was 3M (MMM), up 3.5% for the week.  Apple (AAPL)  -- the stock probably too many people were talking about -- finished with a 2.2% gain to $235.97. Apple's iPad device was to go on sale Saturday.

Futures trading on Friday suggests that the jobs report should help stocks move higher when traders return Monday from the Easter weekend. The stock market was closed for Good Friday. But how much higher stocks can move may depend on how the bond market weathers a big head wind: Treasury auctions.

The Dow finished with a 0.7% gain for the week to 10,927. The Standard & Poor's 500 Index ($INX) added 1% to 1,178, and the Nasdaq Composite Index ($COMPX) rose a modest 0.3% to 2,403.

The gains put the Dow up 4.8% for the year, with the S&P 500 up 5.7% and the Nasdaq up 5.9%.

It's easy to say the Dow is within 73 points of 11,000 and the S&P 500 is within 22 points of 1,200.

 

Markets for the week
			4/2/2010			3/26/2010			% chg.			YTD chg.
Dow industrials			10,927.07			10,927.07			0.0%			4.8%
S&P 500			1,178.10			1,178.10			0.0%			5.6%
Nasdaq			2,402.58			2,402.58			0.0%			5.9%
Russell 2000			683.98			683.98			0.0%			9.4%
Crude oil			$84.87			$84.87			0.0%			6.9%
(per barrel)
U.S. Dollar Index			81.44			81.44			0.0%			4.1%
10-yr. Treasury			3.94%			3.94%			0.0%			0.4%
Gold			$1,126.10			$1,126.10			0.0%			2.7%
(per troy ounce)

But the Treasury auctions are a real issue. The yield on the 10-year note was at 3.94% on Friday, up from a low of 3.55% on Feb. 5. If the yield goes to, say, 4.3%, you might see the rate on a 30-year mortgage rise to 6%. And that might be enough to end any hope of a housing recovery.

The Treasury will auction $40 billion in 3-year notes on Tuesday, $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday.

Three things to watch:

• The bid-to-cover ratio, a key measure of investor demand.
• Indirect bidding. That's Treasury talk for central banks. Many analysts worry that China, which is the largest holder of Treasury securities, will be limiting its purchases because of growing conflicts with the Obama administration.
• The yield, which is the result of the first two points.

The Treasury auction comes in a week of light economic reports.

Three reports are worth watching:

The Institution of Supply Management's Non-Manufacturing Index, due Monday. This should show an improvement that helps confirm the ongoing recovery. The transportation components are starting to move higher, a good sign for economic bulls. In the week ending March 27, freight-car loadings hit their highest levels since November 2008, the Association of American Railroads reported last week.

The Pending Home Sales Index for February from the National Association of Realtors, due Monday. This measures sales contracts signed but not yet closed. This report may be distorted by the snowstorms that hit the Midwest and East Coast.

Minutes from the Federal Reserve's Federal Open Market Committee meeting on March 16, due Tuesday. This may not move markets, but it will offer a glimpse of the central bank's thinking on when the Fed should start raising its key federal funds rate. Most analysts don't see a rate increase until fall at the earliest. (You can read the minutes from the Fed's Jan. 26-27 meeting here.)

Thursday, major retailers will report their March sales. The one exception is Wal-Mart Stores (WMT), which stopped the practice last year. As a group, they reported stronger-than-expected sales for February, which gave the market a lift.

Johnson Redbook Research and the International Council of Shopping Centers have been noting that weekly sales trended higher all through March.

 

A light week for corporate earnings
This week is very light on earnings. The first-quarter earnings season will start in the week of April 12.

The reports of interest are.

Tuesday: Franklin Covey (FC). The supplier of training and planning products is trading at $7.78, just below its 52-week high.

Wednesday: Bed Bath & Beyond (BBBY), Family Dollar (FDO), Monsanto (MON), Pep Boys -- Manny Moe & Jack (PBY), Shaw Group (SHAW) and WD-40 (WDFC), maker of the ubiquitous spray lubricant.

Bed Bath & Beyond has a most consistent chart since the 2009 market bottom and got a bit of a lift after Williams Sonoma (WSM) reported strong fourth-quarter earnings.

Monsanto is a play on agriculture, and soybeans and corn have been pressured by huge crops in 2009.