Wall Street turns its focus to the job market in the coming week with a key labor market report due after a weekly loss for the first time in three weeks for US stocks.
Friday’s employment report for this month may provide a direction for the market, which has seen choppy trading so far this year.
“The rolling correction since mid-January remains the dominant trend and we expect more well into March,” Wells Fargo Advisors chief market strategist Al Goldman said.
“This is all normal action after the 70 percent rally and the mood in Washington and among most Americans. The improving economy will eventually win out, but not right now,” he said.
In the past week, the Dow Jones Industrial Average fell 0.7 percent to end at 10,325.26. The blue-chip barometer rose a hefty 2.6 percent this month.
The technology-dominated NASDAQ composite shed 0.3 percent for the week to 2,238.26 and ended the month with a robust gain of 4.2 percent.
The broad Standard & Poor’s 500 index shrank 0.4 percent for the week to 1,104.49, but rose 2.9 percent for the month.
Analysts said the market would continue to be dogged by unemployment concerns and woes in the housing sector, which was at the epicenter of the financial crisis.
US consumer confidence will remain under stress as a result of the near double-digit jobless rate.
“We continue to believe that the economy is slowly improving, coming out of its deep recession hole, but most likely at a pace that will continue to try the patience of investors and the unemployed,” said Frederic Dickson, chief market strategist at DA Davidson & Co.
The US government on Friday revised US economic growth upward to 5.9 percent in the fourth quarter from an initial estimate of 5.7 percent, surprising most analysts who had expected no change in the first estimate.
It followed a 2.2 percent increase in GDP in the third quarter, the first economic growth after four quarters of contraction.
While consumer spending, which drives two-thirds of US economic activity, increased 1.7 percent, it slowed from a rise of 2.8 percent in the third quarter.
The Conference Board, a business research firm, also said earlier in the week that its consumer confidence index fell to 46.0 this month — its lowest reading since April last year — from an upwardly revised 56.5 last month.
“On the flip side, although recovering, the consumer is facing numerous headwinds and after a nice move in 2009, we believe the consumer discretionary sector is poised to underperform,” Brad Sorensen of Charles Schwab & Co said.
“Wage gains are relatively weak, unemployment remains elevated, and retailers are having trouble maintaining pricing power to any degree,” he said.
But Gregory Drahuschak of Janney Montgomery Scott said that while numerous economic challenges remained, “for the intermediate-term, corporate earnings improvement should be enough to keep the market in reasonably good condition.”
Overall earnings results continued to come in ahead of even the most optimistic forecasts and outlook remains bullish.
While the analysts are still raising their earnings estimates, they are starting to make some adjustments to reflect all the positive earnings surprises, said Ed Yardeni, president of Yardeni Rsearch.
In the week ahead, IHS Global Insight analysts said the unusually cold weather conditions this month and other special factors could affect the monthly economic indicators to be released, including those for motor vehicle sales and payrolls employment.