At this point, Wall Street is anticipating a fairly weak third quarter overall, but it expects corporate growth to bounce back robustly in the fourth quarter. Any indication that companies aren't rebounding as well as the market is hoping could derail the stock market, which has risen back into record territory.Last week, the major stock indexes managed modest gains. The week was a bit rocky but saw the Dow Jones industrial average and the Standard & Poor's 500 index touch all-time highs. The Dow finished the week up 0.19 percent, the Standard & Poor's 500 index ended up 0.27 percent, and the Nasdaq composite index rose 0.91 percent.
The gains were fueled in part by the week's economic data, which were mostly positive. On Friday, the Commerce Department said retail sales rose 0.6 percent in September from August
-- double the growth economists predicted -- a day after some U.S. retailers reported sluggish demand in September.
"Good news on the consumer front tells us that while the economy is not out of the woods yet, a clearing is emerging," said Bernard Baumohl, managing director at the Economic Outlook Group LLC, in a note.
"While I do expect more bad news to come out of the mortgage sector the next six months, the element of surprise is gone," he wrote.
This week does bring some key economic gauges, which investors hope will suggest that the economy is still growing moderately and that inflation is under control.
The National Association of Home Builders releases its housing market index Tuesday. On Wednesday, the Labor Department releases its August reading on consumer prices, the Federal Reserve puts out its Beige Book on economic conditions around the country, and the Commerce Department reports on housing starts. And Thursday, the Conference Board releases its September index of leading economic indicators.
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Meanwhile, Wall Street will be listening to speeches from some Fed officials during the week
-- including Chairman Ben Bernanke, who is scheduled to speak at a St. Louis Fed conference Friday. The markets are split on whether policy makers will lower interest rates again when they meet Oct. 30-31.
Most investors would like another rate reduction after the half-point cut made Sept. 18. The Fed's move helped loosen up the credit markets and restore confidence in the stock market.
But perhaps even more so, investors want to see that corporate America is still seeing profit growth despite the slowing economy.
Other major companies releasing third-quarter earnings this week include Johnson & Johnson, Yahoo Inc., Coca-Cola Co., Merrill Lynch, Advanced Micro Devices Inc., Pfizer Inc. and McDonald's Corp.
[Associated Press; by Madlen Read]
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