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Investors will be looking for signs of economic strength to
reinforce the positive direction hit Friday, when the S&P 500
hit an intraday record high. Data estimates for next week show
the manufacturing and services sectors are expected to have
expanded in July while the economy is seen having added a
healthy 180,000 jobs this month.
"I think the economy in the U.S. is getting better and still can
improve. The overall tone will be of an economy that is getting
better at a reasonable pace," said John Manley, chief equity
strategist at Wells Fargo Funds Management in New York.
The U.S. stock market has been trading flat as second-quarter
earnings have come in better than initially expected, but the
outlook for third-quarter earnings has worsened. In fact, the
S&P 500 traded in a less-than-1 percent range throughout the 12
sessions to Friday, a lull not seen in data going back to 1970,
according to Ryan Detrick, the senior market strategist at LPL
Financial.
It is no wonder that investors are suffering from a lack of
resolve; they have been pushed and pulled by a slew of other
factors, including worries about the global economy and the fact
that shares have already been on a tear not well supported by
several quarters of weak earnings. Stocks are pricey now, but so
are other asset classes.
The S&P 500 is trading near its record high, at roughly 17.2
times the earnings of its component companies over the next 12
months, a valuation that is expensive when compared to its 15.5
median, according to Thomson Reuters data.
Selling is not an obvious choice either, since those who must
remain invested face few other choices. Bonds sport high prices
and near-record-low yields, and commodities, led by oil, hit a
wall after a strong first half of the year. U.S. crude <CLc1> is
down 14 percent this month alone.
The lack of direction in the S&P index as it sits near its
record close of 2,175.03 hit July 22 could be an indication of
strength, as these new highs are digested by the market.
If the jobs report data land far from expectations, that will
likely give indexes a jolt on Friday, said Michael Yoshikami,
CEO and Founder at Destination Wealth Management in Walnut
Creek, California.
But neither that jolt nor the earnings reports still to come
would be enough to set stocks on a new course, he said, because
of the uncertainty brought on by the final stretch of the U.S.
presidential election campaign leading up to the Nov. 8 vote.
"Between now and the election there’s going to be so many
headlines that it's going to be difficult for the market to
really rally significantly," Yoshikami said.
(Reporting by Rodrigo Campos; Editing by Linda Stern and James
Dalgleish)
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