Wall Street wants consumers to do their part to heal the economy. Traders know it's going to take some time.
Investors will get some insight this week into how much consumers are spending from a government report on August retail sales.
They will also get an indicator of how willing consumers are to borrow money to make those purchases when credit card lender Discover Financial Services reports earnings Thursday.
"I think everybody is focusing so heavily on if people are releasing some of those dollars they have been clinging so tightly to over the past year," said Jamie Cox, managing partner at Harris Financial Group in Colonial Heights, Va.
Analysts say investors need to see evidence that consumer spending is picking up before the market can extend its recent gains.
Economists surveyed by Thomson Reuters estimate retail sales increased 1.2% last month, after falling 0.1% in July. The report comes out Tuesday.
Many analysts have been expecting a pullback in the markets, which have risen more than 50% since bottoming out at a 12-year low in early March.
The S&P 500 index, a widely used market gauge and the basis for many mutual funds, rose for five days before slipping Friday and ending the week up 2.6%. The Dow rose 164 points, or 1.7%, for the week.
"The market could take a breather before third-quarter earnings reports," said Peter Cardillo, chief market economist at New York brokerage house Avalon Partners Inc. Companies will start reporting results in early October for the three months ending in September.
The stock market ended the week with a few pieces of reassuring news on the economy. The Commerce Department reported Friday that even though wholesale inventories fell for a record 11th straight month in July, sales rose by the largest amount in more than a year. Also, the University of Michigan consumer confidence index showed improving views of current conditions as well as expectations for the future.
"You have to remember that consumers will spend money if they feel like their prospects for a job or for wealth feels OK," Cox said. "That 'wealth effect' is huge."
Despite signs that the recession is easing, the reluctance of consumers to spend money is a top concern to investors. With spending by consumers making up a huge portion of the U.S. economy, about 70%, economists see little chance of a robust economic rebound until that spending picks up again.
This month, the Labor Department reported that the unemployment rate jumped almost half a point, to 9.7%, in August, the highest level since 1983.
Experts expect the unemployment rate to surpass 10% before coming back down, and the concern is that rising unemployment will put more pressure on beleaguered consumers and further depress their spending.
Investors will also see whether consumers are helping the electronics retailer Best Buy Co., which is slated to report earnings Tuesday.
Nearly all lenders are seeing more customers miss their monthly payments as the economy falters and unemployment surges, but analysts say Discover Financial has been doing better than its peers.
"Consumers are definitely paying down credit card debt and not replacing it with new debt, and that's not unhealthy," said John Ulzheimer, president of consumer education for Credit.com, an online financial services company. "People should be paying for things in ways that they can afford."
Investors may have more reasons to bid stocks higher this week if signs of strength emerge in new housing and manufacturing data. The market will get readings on housing starts for August as well as two regional manufacturing reports.
The week also brings a sobering milestone: The one-year anniversary of the collapse of Lehman Bros., which became the largest bankruptcy in U.S. history and triggered the most acute phase of the financial crisis.
President Obama will make a speech today from Wall Street on the government's response to the crisis.
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At a glance
President Obama gives a speech from Wall Street on the financial crisis.
Senate Homeland Security and Governmental Affairs Committee hearing on cyber attacks.
Commerce Department releases data on retail sales for August and business inventories for July.
Labor Department releases the producer price index for August.
Senate Finance Committee hearing on unemployment insurance benefits.
Quarterly earnings reports due from Adobe Systems, Best Buy and Kroger.
Labor Department releases August consumer price index.
Commerce Department releases current account trade deficit for the second quarter.
Treasury releases Treasury International Capital securities and banking data.
Federal Reserve releases industrial production data for August.
National Assn. of Home Builders releases housing market index for September.
House Judiciary subcommittee hearing on international airline alliances and antitrust laws.
House Oversight and Government Reform subcommittee hearing on how the bureaucracy of private health insurance companies affects the medical care of patients.
Quarterly earnings report due from Oracle.
Labor Department releases weekly jobless claims data.
Commerce Department releases housing starts for August.
California employment and jobless data for August due from the state Employment Development Department.
-- Associated Press