The Dow Jones industrial average is now perched below the 13,000 mark, lifted last week by surprisingly strong earnings reports. If this week's reports follow that trend, investors may send the index hurtling past that milestone.
So far, 16 of the 30 Dow component companies have released earnings from the first three months of the year, and 10 have beaten expectations. This week, six more Dow components report results, including Exxon Mobil Corp., which in 2006 posted the largest annual profit by a U.S. company, and Microsoft Corp., which investors will be eyeing for clues about the potential of the technology sector.
But while the Dow is back in record territory, and the Standard & Poor's 500 and Nasdaq composite indexes are at their highest levels in more than six years, many market watchers are skeptical about Wall Street's ability to extend last week's streak with the same vigor. Volatility remains higher than it was before the stock plunge on Feb. 27 that sent the Dow tumbling 416 points, and although the market has recovered its losses, many of the same concerns that took the market down two months ago remain: high inflation, a weakening dollar and a slow housing market.
Investors will have a good deal of housing data to examine this week. Recently, reports have shown that the housing market is still tepid, but more resilient than many investors expected, suggesting that the troubles with subprime mortgages aren't affecting the broader lending industry, and that homeowners won't feel the need to rein in spending.
On Tuesday, the National Association of Realtors reports sales of existing homes in March. The market expects that 6.50 million existing homes were sold, down slightly from 6.69 million in February, according to the median forecast of economists surveyed by Thomson Financial. Also Tuesday, Standard & Poor's releases its February index of home prices.
On Wednesday, the Commerce Department reports on new home sales in March. Economists predict that 851,000 new homes were sold in March, compared with 848,000 a month earlier.
Last week, benign inflation data also helped stocks surge. The Dow rose 2.77 percent, the S&P 500 rose 2.17 percent, and the Nasdaq rose 1.38 percent, the AP reports.
In the data department, Tuesday's report from the Conference Board on its index of consumer sentiment will be a highlight. The index fell to 107.2 in March from 111.2 in February; in a Reuters poll of economists, the median forecast for April points to further slippage to 105.0.
On Friday, the Reuters/University of Michigan Surveys of Consumers is due for an update. A preliminary report showed the consumer sentiment index for April slipped to 85.3 from 88.4 in March. The consensus is for a final reading of 85.2.
As the slump in housing remains a worry for investors, they will have more data to consider Tuesday and Wednesday.
The National Association of Realtors will report March existing home-sales data on Tuesday while on Wednesday investors get a look at data on new home sales. According to the consensus, new sales activity in March is expected to rise slightly from the pace in February, which was the lowest level in nearly seven years.
Also on Wednesday, the Commerce Department issues data on durable goods orders for March. The median forecast is for a 2.5 percent increase, which would be larger than February's 1.7 percent increase.
The economy will come into focus on Friday when investors get their first look at the pace of U.S. growth in the first quarter. The consensus forecast calls for a 1.8 percent annual rate, down from 2.5 percent in the fourth quarter of 2006.
"We see a continued deceleration in GDP through the remainder of the year," said Hugh Moore, a partner in investment manager Guerite Advisors, Greenville, South Carolina.
Moore said he is telling investors that if they want to stay invested in stocks they should have their money in large-cap multinationals and dividend-paying stocks, Reuters reports.
Prepared by Alexander Timoshik
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