MW: As recession ends, stock investors look to recovery path
Focus in coming week will be housing, jobs reports, stocks' continued growth
SAN FRANCISCO (MarketWatch) -- With the recession in their review mirrors, stock investors are looking for signs whether the economic recovery will be swift and smooth, as charts seem to suggest, or take a bumpy, painful detour.
Markets, having just hit new highs for the year, are looking to reports on August home sales plus the closely watched weekly employment numbers for clues.
Housing data "have been in improvement mode, and as long as they continue in that mode, which we believe they will, we believe they will put more support into the market," said David Chalupnik, head of equities at First American Funds, a unit of U.S. Bancorp that manages $72 billion in assets.
The Federal Reserve on Wednesday is scheduled to release its statement on monetary policy. That statement may give more insight into how and when the Fed will unwind its quantitative easing programs, or its unprecedented forays into the private bond and loan markets that have effectively created more cash in the financial system.
As far as the Fed goes, the less change of plans the better for stock investors, says Chalupnik.
"We want to see a continuation of support for programs that are in place," he said. "You need the Fed to stay in there longer to see how long this recovery will be sustained."
Also in the week ahead, two homebuilders report results, starting with Lennar Corp. (LEN 16.54, -0.06, -0.36%) on Monday. KB Home (KBH 20.21, +0.52, +2.64%) is set to report on Friday.
BlackBerry maker Research in Motion (RIMM 83.62, +0.92, +1.11%) (CA:RIM 89.26, +1.01, +1.14%) and packaged food-producer General Mills (GIS 60.31, +0.25, +0.42%) will also release results. See BlackBerry earnings preview.
On Thursday and Friday, the world's leaders descend on Pittsburgh for the G20 meetings, when they are expected to tussle over proposals on curbing bankers pay and could discuss simmering trade disputes. The presidents and prime ministers of the world's major economies are expected to offer little, if anything, in the way of new measures to boost global recovery, though markets could respond to statements suggesting they're keeping stimulus programs in place. Comments along those lines swayed currency and commodity markets after the G20 finance leaders met earlier this month. Read preview of G20 meeting.
Week past: New '09 highs
U.S. stock indexes reached new highs for the year in the past week, with the S&P 500 (SPX 1,068, +2.81, +0.26%) topping 1,071 intraday on Friday and the Dow Jones Industrial Average (INDU 9,820, +36.28, +0.37%) coming less than 200 points below the key 10,000 mark.
Comments from Fed Chairman Ben Bernanke and private sector economists that the recession likely had ended this summer encouraged investors to bid up stocks in companies seen as benefiting from global recovery.
General Electric Co. (GE 16.50, -0.16, -0.96%) lifted itself into a year-to-date gain as its shares advanced toward a 12% gain for the week. Caterpillar, Inc. (CAT 53.42, -0.47, -0.87%) shares rallied 10% for the week.
A surprise surge in retail sales, helped by the U.S. government "cash for clunkers" auto-sales rebate scheme; the second straight monthly expansion in industrial production; and a jump in the Philadelphia Federal Reserve Bank's business conditions index supported stocks in the past week.
