Look for US stocks to trade slightly higher next week as Wall Street cheers improving corporate profits, recent military successes in Afghanistan and growing optimism for an economic recovery next year.
Better-than-expected earnings from tech bellwethers such as Hewlett-Packard Co have helped brighten the outlook for the battered sector.
Investors have also taken heart from surging retail sales data that shows consumers are flocking to stores -- and buying.
"The market has an upward bias to it," said Edward Hemmelgarn, president of Shaker Investments, which oversees US$2 billion in Cleveland, Ohio. "Companies aren't missing their numbers anymore. The news isn't getting any worse and, in fact, it's actually starting to improve."
Still, traders expect volatility caused by light volume as portfolio managers and other investors head out of town for the Thanksgiving holiday, which will be observed on Thursday, Nov. 22. The stock market will be closed on Thursday and will shut down early on Friday.
Just 3.48 billion shares changed hands on the New York Stock Exchange during Thanksgiving week last year, compared with 6.26 billion traded on the week ended Nov. 9.
"We're going into a light volume week and a lot of participants will be out, so the potential for volatility is there," said John O'Donoghue, co-head of listed stock trading for Credit Suisse First Boston.
A slew of retailers will report quarterly results, including the nation's No. 2 home-improvement retail chain, Lowe's Cos. Inc., and Intimate Brands Inc., which operates the Victoria's Secret lingerie chain.
Investors say they will look for signs revenues and profits are on track to improve next year. Some are betting that signal will come and they have been loading up on retail stocks in advance.
"We're focusing on the consumer discretional companies, such as Home Depot Inc and Best Buy Co because they're companies that benefit from an improvement in the economy," said Joseph Stocke, who helps manage US$1 billion for StoneRidge Investment Partners.
Lowe's, which ranks second only to Home Depot, is expected to report earnings on Monday, while Intimate Brands' results are anticipated on Tuesday. Toys R Us Inc, the nation's largest toy-store chain, is also expected to report earnings on Monday.
Economic data will be light next week. On tap: October's housing starts and weekly jobless claims. Also expected next week is a monthly semiconductor equipment industry report, which may strengthen hopes a bottom has been reached in the chip-making industry's worst downturn in decades.
Stocks closed the week higher after retail sales data and some strong profit reports boosted hopes the US economy is on track to rebound by the middle of next year.
The broad Standard & Poor's 500 index rose 1.6 percent for the week, while the tech-laden NASDAQ composite index gained 3.8 percent. The blue-chip Dow Jones industrial average finished the week up 2.7 percent.
On Wednesday, the Commerce Department said total retail sales zoomed ahead by 7.1 percent in October as consumers took advantage of cheap financing to buy new cars. That was the strongest one-month gain since records were started in the late 1960s.
Also boosting optimism was Hewlett-Packard's profit results, which trounced Wall Street forecasts after tough cost cutting. Advances in the US-led war in Afghanistan also helped. On Friday, US officials said a chief lieutenant of fugitive Osama bin Laden is believed to have been killed in a US airstrike.
Some strategists are wary.
Douglas Cliggott, the chief portfolio strategist for JP Morgan, has cut his 2002 earnings-per-share outlook for companies in the S&P 500 to US$36 from US$38, on expectations business spending will be below its year-earlier level at the end of next year. Cliggott said he believes the S&P 500 could tumble below this year's lows next year.
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