Is it game over for the recession? Or will consumers stay in hibernation?
Investors will watch next week’s new home sales and consumer data to see if the economy’s recovery is on track and whether US stocks — now at highs for this year — will extend their rally.
On Friday, Wall Street got more confirmation that the economy is on the mend with a report showing existing home sales last month rose 7.2 percent — the fastest pace in nearly two years and a sign that housing is pulling out of a three-year slump. The data, combined with stronger-than-expected second-quarter earnings, pushed the Standard & Poor’s 500 and the NASDAQ to the highest levels since last October.
So the report on new home sales for last month, due on Wednesday, is likely to get more scrutiny than usual from investors who want proof that the rally has been driven by more than hope for an economic turnaround.
“What we’ve seen so far has been data signaling that it’s the end of the recession,” said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.
Other major indicators on the upcoming week’s economic calendar include consumer confidence, durable goods orders, GDP, personal income and consumption, and consumer sentiment.
For the week, the Dow Jones industrial average ended up 2 percent, the S&P 500 gained 2.2 percent and the NASDAQ climbed 1.8 percent. The S&P 500 is up 51.7 percent from its 12-year closing low set on March 9.
Stronger-than-expected second-quarter earnings have helped bolster stocks over recent weeks. The S&P 500 is up about 11 percent since July 1.
Single-family home prices for June, due from the Standard & Poor’s/Case-Shiller home price index on Tuesday, are forecast to rise 0.2 percent, which would confirm May’s surprising turnaround.
New home sales in July are expected to rise to an annual rate of 390,000 units, according to Thomson Reuters data. June’s new home sales came in at an annual rate of 384,000 unites. Coupled with Friday’s better-than-expected existing home sales figures, optimism about the housing market could continue stocks’ advance.
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