Though investors go into this week believing the economy is emerging from recession, they still need to see more solid evidence of a rebound.
The foundation for a recovery is there: Consumers are growing more confident and the housing market keeps showing signs of improvement. The latest reading on the nation's gross domestic product showed the economy shrinking at a slower-than-expected pace during the second quarter.
But with a nearly six-month rally leaving the Dow Jones industrials less than 500 points away from 10,000, analysts say it now will take actual economic growth or at least strong momentum to extend Wall Street's gains. This week's economic reports, including the first readings on employment and manufacturing during August, have the power to sustain or stifle stocks' advance.
"The market is at a point where if the news doesn't start becoming not just less bad, but . . . fairly positive, the market is going to start selling off," said Ben Halliburton, chief investment officer of Tradition Capital Management.
The most anxiously awaited piece of data this week is the government's monthly employment report. Investors want to see more signs that employers are cutting fewer jobs. Economists surveyed by Thomson Reuters expect that an additional 220,000 jobs were lost, down from 247,000 in July.
The week also brings a reading on consumer spending in the form of major retailers' August sales reports. July's business was slow, raising concerns about the holiday shopping season, and there have been mixed readings on consumers' state of mind since then.
All the major market indexes, including the Dow, the Standard & Poor's 500 and the Nasdaq composite indexes, rose less than half a percent last week. The rally, at least for now, appears to be on hold as investors, uncertain about the economy's direction, await this next batch of data.
The week's scheduled reports also include two from the Institute for Supply Management, which will be issuing its assessments of the manufacturing and service sectors during August. The institute's manufacturing index, to be released Tuesday, is forecast to come in at 50.1, up from 48.9 in July and a significant change. Readings above 50 mean the sector is expanding.
The service sector report, scheduled for release Thursday, covers retailers, financial services, transportation and healthcare. The service index is expected to have risen to 48 from 46.4.
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At a glance
Institute for Supply Management releases its manufacturing index for August.
Major automakers report U.S. auto sales for August.
Federal Reserve releases the minutes of the Federal Open Market Committee meeting of Aug. 11-12.
National Assn. of Realtors releases its pending home sales index for July.
Commerce Department releases its construction spending report for July.
Labor Department releases reports on second-quarter productivity.
Commerce Department reports on factory orders for July.
Securities and Exchange Commission and Commodity Futures Trading Commission start four days of joint meetings on current financial rules and recommend changes.
Retailers report sales results for August.
Institute for Supply Management releases its service sector index for August.
Labor Department reports on weekly jobless benefit claims.
Mortgage financing company Freddie Mac releases its weekly report on mortgage rates.
Labor Department releases employment data for August.
Source: Associated Press