Wall Street's steep gains in the final days of October are leaving some investors optimistic that the market has put its scariest days behind it, but they're still wary about land mines that could send stocks reeling again.
Tuesday's presidential election could help erase some unknowns over how the power structure in Washington will affect investors, but pressing economic questions could ultimately shape the week.
Reports due on manufacturing, the service sector and, most important, employment, could determine whether the market stays above its mid-October lows and holds on to some stability.
Sunday, stock index futures signaled a moderately lower open. The market's volatility in September and October, however, has made futures a less reliable indicator of how the market will indeed open.
Some analysts believe Wall Street's wild ride is not yet over.
"There is a saying that bear markets end in exhaustion," said Axel Merk, portfolio manager at Merk Funds, suggesting the market isn't at that point.
To carve out a sustained advance, Wall Street will need to look past dispiriting signposts about the economy, he said.
"If the market reacts positively to bad news that would be a very positive sign," Merk said. Last week, investors did manage to write off some weak readings on personal spending and consumer confidence.
There are other positives emerging, Merk and others note: Some sources of selling pressure are easing as nervous investors abandon the market.
The chief worry that set off the market's year-old decline, the housing market, remains, Merk noted. "We haven't seen the bottom yet in the housing market and ultimately that's the problem," he said.
Investors are hoping the Dow can continue to trade above its Oct. 10 close of 8,451.19, its lowest finish since April 2003. The S&P 500 also recorded a low Oct. 10 of 899.22.
But even with the partial recovery last month, it's impossible to know whether the market, down 38% from its October 2007 peak, has adequately priced in the effects of a tough economy.
Georges Ugeux, chairman of Galileo Global Advisors, contends troubled debt from credit cards, for example, could emerge as a heightened worry as the economy slows.
While the markets showed more orderly trading of late, this week brings more economic data that could unnerve Wall Street.
