The 6-week stock rally stalled last week. This week's hurdles include the Fed and retail sales.
December 12, 2004: 8:40 AM EST
By Alexandra Twin, CNN/Money Staff Writer
NEW YORK (CNN/Money) - After a six-week run, the rally finally showed its age last week ... and the jam-packed week ahead may continue to test its stamina.
"It's been such a nice run already, really a good run since August," said David Briggs, head of equity trading at Federated Investors. "I think the market is going to chop around here, maybe end the year just a little bit higher."
The pure quantity of events in the week ahead are likely to keep investors jittery, as they sort through a slew of quarterly earnings and notable economic reports.
On Tuesday the Federal Reserve Board meets to discuss short-term interest rates, with a decision expected in the afternoon.
Economists, on average, are expecting the central bank to boost the Fed funds rate, an overnight bank lending rate, by a quarter percentage point to 2.25 percent. (For a preview of next week's Fed decision, click here.)
"I think the Fed raising rates 25 basis points is pretty much built into the market at this point," said John Forelli, portfolio manager at Independence Investments. "As is often the case, people will be watching the language in the statement for indications of what the Fed is going to do at upcoming meetings."
Other key events include the November retail sales report, November housing starts and building permits and the November read on consumer prices. (For a preview of the week's key economic events, click here.)
In particular, the retail sales numbers will be watched for signs of how the all-important holiday shopping period is continuing to shape up. A few retailers also report earnings, as well, including Best Buy and Circuit City.
Other potentially market-moving earnings reports due in the week ahead include FedEx, Oracle, Lehman Brothers and Lennar. (For a preview of the week's key earnings, click here.)
In addition to the economic news, "next week we also have the options expiration on Friday, which should mean more volatility, and the volatility should favor the upside," said Peter Cardillo, chief market analyst at S.W. Bach & Co.
Friday is a "quadruple" witching day, a quarterly event in which stock index futures and options, and individual stock futures and options all expire at the same time. This tends to create increased volatility in the underlying stocks in the days leading up to it, as investors either exercise their options or move them forward in the 11th hour.
"My sense is that something is going to get people bullish before the end of the year, but it may not be the events of next week," Forelli added.
"January tends to be strong in terms of returns, with a lot of 401(k) money coming in, so everyone wants to get in ahead of it," he added. "But the problem is that some of the economic news has been mixed lately."
Key economic events in the week ahead
The November retail sales report is due Monday from the Commerce Department. Economists surveyed by Briefing.com expect, on average, that sales rose 0.1 percent after rising 0.2 percent in October. Sales excluding autos are thought to have risen 0.4 percent after rising 0.9 percent in October.
The October business inventories report is due Monday morning. Inventories probably rose 0.5 percent after rising 0.1 percent in September, analysts forecast.
Wednesday brings the NY Empire State index, which looks at manufacturing in the New York area. Economists expect the index to rise to 20 from 19.76 in November. The Philadelphia Fed, which looks at manufacturing in the midwest, is due Thursday. The Philly Fed index likely fell to 20 from 20.7 in November.
On Friday, the consumer prices report is due. CPI probably rose 0.2 percent in December after rising 0.6 percent. So-called core CPI, which strips out volatile food and energy, is expected to rise 0.2 percent after rising 0.2 percent in November.
Key earnings in the week ahead
Best Buy (Research) reports results Wednesday mornings. The electronics retailer is expected to have earned 44 cents per share, according to First Call estimates, up from 37 cents a year ago. Rival Circuit City (Research), which reports Friday morning, is expected to have lost 8 cents per share, after losing 12 cents a year ago.
Also Wednesday, Lehman Brothers (Research) is expected to post earnings of $1.69 per share, 2 cents short of a year ago. Another brokerage, Goldman Sachs (Research), is expected to have earned $2.32 a share when it reports Thursday. That would be up from $1.89 a year ago.
Homebuilder Lennar (Research) reports its earnings before the bell Wednesday, and is expected to have earned $2.21 per share, according to analysts, up from $1.69 a year ago.
FedEx (down $0.76 to $98.85, Research) is due Thursday morning. The carrier is expected to have earned $1.27 per share, up from 87 cents a year ago.
After the close Thursday, Oracle (down $0.01 to $13.28, Research) releases results. The software maker is forecast to have earned 14 cents per share, two cents more than it earned a year ago.
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