MARKET SNAPSHOT: U.S. Stocks To Get Another Run At Jobs And Retail

By Laura Mandaro

U.S. stocks in the week ahead face another round of reports on how consumers are dealing with tough but recently improving job prospects, information that could swing a market shown to make sudden reversals on minor shifts in sentiment.

A push by Congressional Democrats to pass a new jobs-spending package, combined with weekly jobless claims, will give investors a fresh sense of whether the 15.4 million unemployed in the U.S. will still soon start to find work.

Then, retail sales and consumer sentiment reports, plus a handful of quarterly results from retailers including Costco Wholesale Corp. (COST), will show whether individuals are able to start spending again. And Federal Reserve Chairman Ben Bernanke speaks Monday.

Stock strategists said factors that dominated trade in the past week -- optimism about the improving job market, mixed reads on consumers' buying abilities, and nervousness on the market's 66% rise since early March -- are likely to crop up in the week ahead.

"We're trying to come back to normalcy, with this constant fear of the next shoe to drop," said Erik Davidson, managing director of investments for the western U.S. for Wells Fargo & Co.'s private bank unit.

Caution by investors looking to preserve gains has held the market from making a bolder move higher, say some analysts.

"It's been a long two years," Davidson said. "It's time for people to take a deep breath."

Plus, the market is wrestling with the downside of a recovering economy - the likelihood that the Federal Reserve may raise interest rates, now near zero percent, over the next year. Higher benchmark rates would raise borrowing costs and make the U.S. dollar more valuable, possibly curtailing gains in high-flying investments.

Stocks surged early after Friday's jobs report showed nonfarm payrolls dropped by 11,000 in November, blowing away expectations for a 100,000 drop.

But stocks gave up much of those gains by day's end, and even dropped into the red for a while, in part because a jump in the U.S. dollar sank commodities prices and stocks in natural resource firms.

For the week, notable for below-average volume, the Dow Jones Industrials Average (DJI) gained 0.8%, the S&P 500 (SPX) added 1.3% and the Nasdaq Composite (RIXF) advanced 2.6%.

The U.S. dollar ended the week 1.1% higher as measured by the U.S. dollar index (DXY). Its nearly 16% drop this year has helped stoke the recent rally in stocks and commodities, in part by providing cheap credit to buy equities, oil, metals and emerging-markets currencies.

Any of these factors could change investors' daily take on where they want to place their money - in stocks and oil, on the hope of more gains tied to a recovery, or in assets thought to preserve value while offering little yield, including bonds, gold and the dollar.

"The market has had a good move, it's one of these periods where anything could push it easily," said Andrew Brooks, head of U.S. equity trading at T. Rowe Price & Co.

At the end of the day, said Brooks, improving economic fundamentals will help propel stocks higher. But, he cautioned, "it will grind higher, it won't be a moon shot."

Week ahead

Events that could sway sentiment include efforts by Congressional Democrats to pass a $170 billion jobs-spending package. President Barack Obama will deliver a speech Tuesday at the Brookings Institution, where he intends to lay out his own ideas for a narrowly targeted jobs bill, says the Wall Street Journal.

Investors are likely listen closely to a speech Monday by Fed chief Bernanke.

In past speeches he's reaffirmed the Fed is likely to keep its policy of near zero interest rates in place for an extended period, as the central bank waits for more signs the economy is firmly in recovery mode.

But Friday's jobs report encouraged speculation the Federal Reserve would be able to raise interest rates as soon as mid-2010.

The report "was a game changer," wrote Stephen Stanley, chief economist for RBS Securities.

Stanley kept his outlook unchanged, that the Fed would start raising rates in June, but said now he expects some market participants might be "more receptive to our view."

Economists will be looking at Thursday's report on claims filed for unemployment insurance for signs of whether the pace of layoffs is starting to slow.

The government's report on retail sales in November is likely to show a modest rise after a jump in October. The first version of a December consumer sentiment survey, also out Friday, may show some recovery after a drop in the prior two months.

Plus, alternative energy stocks could move into the limelight as policymakers gather in Copenhagen starting Monday for two weeks of climate-change talks.

The world's top politicians have lowered their original goal of setting a new global agreement on climate change to update the 1997 Kyoto Protocol.

Still, even a less ambitious resolution on lowering global emissions could shift more attention to renewable stocks, such as First Solar (FSLR), wind-power producer Iberdola Renewables and exchange-traded fund Market Vectors Global Alternative Energy ETF (GEX).

And votes by Senate lawmakers on amendments to a 10-year, $848 billion health-care bill - including amendments on abortion and the creation of a national insurance plan - could sway health-care stocks such as Humana Inc. (HUM), WellPoint Inc. (WLP), Aetna, Inc. (AET) and Cigna Corp. (CI).

It's also expected to be a busy week for capital raising, both by the U.S. government and companies selling stocks.

The Treasury Department will sell $74 billion in notes and bonds, including $40 billion in 3-year notes (UST3YR) on Tuesday, $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds (UST30Y) on Thursday.

Plus, several companies are making their U.S. stock-market debuts and issuing secondary offerings.

And eight S&P 500 companies are scheduled to announce quarterly earnings results, including Ciena Corp. (CIEND), National Semiconductor Corp. (NSM), Kroger Co. (KR), AutoZone Inc. (AZO) and H&R Block Inc. (HRB)