What's ahead for the stock market

Updated: 9:44 p.m. ET, Monday.

 

It's not clear that anyone saw this past week's rally coming. The news had been challenging at best.

But rally the stock market did, with the Dow Jones industrials ($INDU) finishing the week up 2.9%. It was the blue chips' first weekly gain after three straight losses and their best performance in the week before Labor Day since 1990, according to Dow Jones. 

Best of all, the Dow pushed back into the black for the year, led during the week by JPMorgan Chase (JPM), up 7% to $39.17, Bank of America (BAC), up 6.8% to $13.50, and Caterpillar (CAT), up 6.3% to $70.08.

• StockScouter:10 hot picks to watch this week

The Nasdaq-100 Index ($NDX.X) also moved into the black for the year again.

 

The gains let traders head out for the Labor Day weekend with smiles on their faces. What's not to smile about when all 30 Dow stocks finish higher on the week?

 

When markets reopen on Tuesday, investors face few earnings reports of importance and only two economic reports with real substance. That alone may let stocks move higher.

Here's what else to watch.

Will more deals emerge? This is the stealth trend that's started to affect markets. Have you dismissed all the noise you've heard as mere rumor? Don't.

Companies with plenty of cash on hand are looking to buy other companies to protect themselves in a soft economy or get ready for the recovery.

The latter is why Hewlett-Packard (HPQ) was so intent on buying 3Par (PAR), the maker of computer storage that can be used in cloud computing. That's where companies offer storage and the capacity to manage software for customers.

Hewlett wants to be a player in the business. So do IBM (IBM), Microsoft (MSFT), Salesforce.com (CRM) and others. (Microsoft is the publisher of MSN Money.)

But dealmaking is coming to regional banks, airlines, gold mining companies and others. And it's not just mergers and acquisitions.

There's a little initial public offering coming in November: General Motors.

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What will the Beige Book say? The Federal Reserve will release its Beige Book report on the economy on Wednesday. The report is a narrative look at what's going on in the economy, based on reports gathered by the staffs of the 12 Federal Reserve banks. What investors want to see is what the report says about trends in hiring, real estate, manufacturing and retailing.

What will Obama say? The president said Friday he'll be offering new proposals next week to help boost the economy. One will almost certainly be to make the research and development credit permanent along with other tax breaks for small business. Wall Street really wants the administration to offer something dramatic and smart. And it wants clarification on where the administration stands on extending the Bush tax cuts. Right now, the Street is expecting the cuts to be extended.

Will jobless claims, which will be reported on Thursday, show more improvement? Maybe. If the Institute for Supply Management's report on manufacturing is right, the answer is probably. If the ISM's non-manufacturing index, which came out Friday, is right, maybe not. Still, new jobless claims fell for a second straight week to a seasonally adjusted 472,000 in the week ended Aug. 28 from 478,000 in the week of Aug. 21 and 504,000 in the week of Aug. 14. The number of workers still getting jobless benefits has dropped for four straight weeks.

Markets for the week
			9/3/2010			8/27/2010			% chg.			YTD chg.
Dow industrials			10,447.93			10,150.65			2.9%			0.2%
S&P 500			1,104.51			1,064.59			3.7%			-0.9%
Nasdaq			2,233.75			2,153.63			3.7%			-1.6%
Russell 2000			643.36			616.76			4.3%			2.9%
Crude oil			$74.60			$75.17			-0.8%			-6.0%
(per barrel)
U.S. Dollar Index			82.12			82.97			-1.0%			5.0%
10-yr. Treasury			2.71%			2.65%			2.0%			-29.6%
Gold			$1,251.30			$1,237.90			1.1%			14.1%
(per troy ounce)

The week ahead really does not have many economic reports, which is typical of the second week of most months.

In addition to the Beige Book, the government will report on crude oil inventories and consumer credit on Wednesday.

Thursday brings the jobless-claims report and a report on the nation's trade balance.

Earnings reports are so light that only one involves a component of the Standard & Poor's 500 Index ($INX). That's National Semiconductor (NSM), which will report after Thursday's close.

The company, whose chips are mostly used in power-management systems, is expected to report 35 cents a share in earnings on revenue of $415.1 million. That would be an increase of 169% on earnings on a revenue gain of 32%.

Also reporting next week are Men's Wearhouse (MW), Smithfield Foods (SFD) and Talbots (TLB) on Wednesday and Stewart Enterprise (STEI), the funeral-home and cemetery operator on Thursday.