Stocks could face more volatility next week as growing doubts about whether Europe can solve its deepening debt crisis are likely to take center stage again.
A $1 trillion rescue package unveiled at the week's start gave only temporary relief to investors, who are increasingly worried about the impact of the crisis on the global recovery and the euro.
Wall Street also will be anxious to see the results from retailers next week, and will pay special attention to their forecasts for the rest of the year. Wal-Mart Stores and Lowe's Co are among companies expected to report.
Below-par results on Friday from retailers, including Nordstrom and J.C. Penney Co Inc , cast some doubt on the consumer's health.
The week also brings government data on inflation, which is expected to remain tame, and on housing, a sector still struggling to recover from the country's worst economic downturn since the 1930s.
The three major U.S. stock indexes ended Friday's session with losses ranging from 1.5 percent to 2 percent amid worries over Europe's debt problems. The CBOE Volatility Index <.VIX> or VIX, which is Wall Street's fear gauge, jumped 17.1 percent. Commodity prices also dropped sharply, with oil sliding to a three-month low below $72 per barrel. The euro fell to an 18-month low against the dollar.
We have had good fundamentals in terms of the earnings news and macro news, but nobody seems to be paying any attention to that any more. All they're worried about is what's happening in Europe, said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.
For the week, however, the Dow Jones industrial average <.DJI> rose 2.3 percent, while the Standard & Poor's 500 index <.SPX> gained 2.2 percent and the Nasdaq <.IXIC> climbed 3.6 percent.
FED MINUTES, CPI AND HOUSING
Minutes from the Federal Reserve's April 27-28 meeting also will be released on Wednesday.
Investors will look for clues on when the benchmark interest rate, held near zero since December 16, 2008, could change.
The U.S. Producer Price Index for April, due on Tuesday, is forecast up 0.1 percent, compared with a gain 0.7 percent in March. Core PPI, which excludes volatile food and energy prices, is forecast up 0.1 pct in April versus a gain of 0.1 percent in March.
The Consumer Price Index for April, due on Wednesday, is seen up 0.1 percent after a March gain of 0.1 percent, while core CPI, omitting volatile food and energy prices, is seen up 0.1 percent in April versus no change in March.
A slight uptick in housing is expected to be shown in both the National Association of Home Builders' May index on Monday and April housing starts on Tuesday.
Housing starts are expected to rise in April to a seasonally adjusted annual pace of 650,000 units from 626,000 in March.
TAKING RETAILERS' PULSE
With consumer spending accounting for about two-thirds of the U.S. economy, investors still see a healthy retail sector as a major ingredient to the economic recovery.
You've built in a level of expectations and there's this big hope that the consumer is going to bring us back, and business spending is going to bring us back, said Peter Boockvar, equity strategist, at Miller Tabak & Co. in New York.
With results in from 459 of the S&P 500 companies, first-quarter S&P 500 earnings are expected to be up 56.6 percent from a year ago, according to Thomson Reuters data. That's up from an April 1st estimate for a gain of 36.6 percent.
Some 77 percent of the companies that have reported have beaten earnings expectations -- well above the 61 percent in a typical quarter, the data showed.
But the reaction in the stock market to the quarter's mostly stronger-than-expected results has been muted, largely because of the focus on Europe.
We know we have good economic activity here, and basically the market is worried that what's good this year is going to turn into bad next year as the problems in Europe ripple throughout the rest of the world and slow down the growth, said Jim Awad, managing director at Zephyr Management in New York.
Among the retailers on next week's agenda are Dow components Home Depot and Wal-Mart, who will report on Tuesday, along with teen retailer Abercrombie & Fitch Co .
After Tuesday's closing bell, tech bellwether and Dow component Hewlett-Packard will report results.
U.S. discount chain Target Corp will release quarterly results on Wednesday morning.
Retailer Limited Brands , which owns lingerie powerhouse Victoria's Secret, is set to report earnings on Wednesday after the closing bell.
On Thursday, quarterly scorecards are due from video game retailer GameStop Corp , moderately priced women's clothing retailer Ross Stores ; major U.S. office supplies retailer Staples , and personal computer maker Dell Inc .
(Reporting by Caroline Valetkevitch; Additional reporting by Leah Schnurr and Edward Krudy; Editing by Jan Paschal)