The Federal Reserve's stance on interest rates helped spark a comeback on Wall Street last week, and investors are hoping that this week's data on new home sales, gross domestic product and personal spending will add momentum to the rally.
The market is still showing signs of volatility, but investors are tentatively optimistic about its recovery after the Dow Jones industrials posted their best weekly point gain in four years and returned to positive territory for the year. The blue chip index jumped 159 points Wednesday after a Fed statement appeared to raise the possibility of a rate cut this year, a move the market hopes would encourage consumer spending.
But because worries continue to plague the market over subprime lenders' troubles and the slow housing market, investors will closely read the Commerce Department's report Monday on February new home sales. Analysts expect a rise to 995,000 from 937,000 in January. On Friday, the National Association of Realtors reported a 3.9 percent surge in February existing home sales.
On Thursday, the Commerce Department will give its final measure of fourth-quarter GDP. Analysts are forecasting a reading of 2.2 percent growth, in line with the government's previous estimate. If the GDP is revised lower, worries could arise that core inflation -- which rose 2.3 percent for the 12 months ending in January, above the Federal Reserve's 1 percent to 2 percent comfort zone -- is outpacing GDP growth by too much, and that the Fed might lean toward a rate hike later in the year after all to curb rising costs.
On Friday, the Commerce Department reports on personal income and spending for February. The market expects both income and spending to rise by 0.3 percent, a slower pace than in January.
In addition to economic data, the markets will be girding themselves for next month's onslaught of financial reports by watching for profit warnings. Last week, technology stocks stumbled a bit after cell phone maker Motorola Inc. warned it would post a first-quarter loss.
Investors will also keep an eye on comments by Federal Reserve Chairman Ben Bernanke on Wednesday and Friday, rising energy prices, and political developments between the United States and Iran, as well as North Korea.
The Dow climbed 3.06 percent last week, bring it within 151 points of its level on Feb. 26, the day before it plunged 416 points in one session. The Standard & Poor's 500 index rose 3.54 percent last week, and the Nasdaq composite index gained 3.52 percent.
OTHER ECONOMIC DATA
On Tuesday, the Conference Board will provide its measure of consumer confidence in March. The market expects the index to slip to 109.0 from 112.5 in February, its highest level in 5 1/2 years.
On Wednesday, the Commerce Department reports on orders of durable goods for February. The market is anticipating durable goods to increase 3.0 percent after a 7.8 percent decline in January -- which along with falling Chinese stocks, a weakening dollar, recession worries and slipping home prices contributed to the Dow's big drop last month.
The University of Michigan on Friday releases its March consumer sentiment index, which the market expects to remain steady at 88.8, while the Commerce Department reports on construction spending in February. Analysts anticipate a 0.6 percent decline, compared with January's decrease of 0.8 percent.
This week will also bring several gauges of business activity. On Monday, the Chicago Fed releases its national activity index and the Dallas Fed releases its index of regional manufacturing. On Tuesday, the Richmond Fed reports on its region's manufacturing, and Thursday, the Kansas City Fed releases its index. The Chicago Purchasing Managers report on Midwestern manufacturing will come out Friday; the Chicago report is seen as a precursor to the national report on manufacturing from the Institute for Supply Management on April 2.
EARNINGS
On Monday, Dollar General Corp. is expected to report fiscal fourth-quarter earnings of 38 cents a share, and drugstore chain operator Walgreen Co. is expected to report fiscal second-quarter earnings of 61 cents a share.
Dollar General closed at $21.25 Friday, near the top of its 52-week range of $12.10 to $21.40.
Walgreen Co. closed at $47.77 Friday, at the upper end of its 52-week range of $39.55 to $51.60.
On Tuesday, Lennar Corp. releases first-quarter earnings, and analysts are forecasting a profit of 43 cents a share. The homebuilder closed at $45.58 Friday, in the middle of its 52-week range of $38.66 to $62.38.
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