Shell-shocked stock investors will search this week for calm to return to markets after the worst three weeks for stocks in 2 1/2 years.
With the blow from the August 5 US credit rating downgrade behind them, investors will focus on the outlook for the US economy as well as signs that European policymakers may be able to contain the euro zone debt crisis.
Widespread investor panic put the market on a roller-coaster ride this week, with steep losses followed by nearly-as-steep gains in high-volume trading. It was the busiest week for volume since October 2008.
Though investors are still searching for a bottom in the selloff that has taken the benchmark Standard & Poor's index down 12.4 per cent since July 22, indexes rose both Thursday and Friday - the index's first two-day rally since mid-July - and volatility eased.
The move could set stocks up for a calmer week, especially if economic data shows the United States is not headed for another recession, strategists said.
'Every bit of data that shows the economy not slipping into recession is going to be the basis for the market to begin to calm down in the weeks ahead,' said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
While Wall Street stocks ended higher on Friday, the market fell for the week. The Dow fell 1.5 per cent and the Nasdaq lost 1 per cent. The S&P 500 fell on 11 of the past 15 days, dropping 12.4 per cent in three weeks.
Housing and manufacturing reports are among indicators on tap next week, including the New York and Philadelphia Federal Reserve regional manufacturing surveys and existing home sales.
Manufacturing has been among the strongest sectors of the economy, but a report earlier this month dented that picture.
The Institute for Supply Management manufacturing report, a gauge of factory activity, fell to in July to its lowest in two years and was barely above the mark dividing growth and contraction.
It was quickly followed by an ISM report showing the pace of growth in the US services sector ticked down unexpectedly.
More recent data has suggested the economic recovery will stay on course.
US commerce department data on Friday showed retail sales posted the biggest gains in four months in July, which was a catalyst for stocks to rise.
'We think the deterioration in the US macro outlook got us into this mess and will likely get us back out,' said Barry Knapp, head of US equity portfolio strategy at Barclays Capital in New York.
'If we're right...we will get the stock market to trade at least back into its old 1,250 to 1,350 range that prevailed from March through the recent downturn.'
Retail earnings have been among the few bright spots in the market this week. Kohl's Corp reported earnings that beat estimates and raised its full-year profit view.
Results from more top retailers are expected next week, including Wal-Mart Stores, due to report on Tuesday.
Source : New Age
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