Stock investors will anxiously await the crucial June jobs data next week for clues on how the U.S. economy may weather recent storms that drove Wall Street's major indexes down for the year.
Friday's jobs report will wrap up a week packed with economic data, including consumer confidence and pending home sales. The week's steady stream of numbers will include some early earnings reports.
Non-farm payrolls are forecast to shed 110,000 jobs in June when the U.S. Labor Department's report is released on Friday. Although much of that drop is due to the government laying off half of its temporary Census workers, another weak reading for private-sector hiring will disappoint investors.
The truth is that without job creation, we're in for a tougher time, and I mean real job creation, not temporary job creation, not part-time job creation -- real job creation, said Kenneth Polcari, a floor trader at the New York Stock Exchange with Icap Corporates.
The U.S. unemployment rate is forecast to rise to 9.8 percent in June from May's rate of 9.7 percent, according to economists polled by Reuters. That's not far below the peak U.S. jobless rate of 10.2 percent, reached last October -- a year after Wall Street's meltdown resulted in one of the worst recessions in decades.
Without solid growth in hiring, the U.S. economy is likely to limp along as most consumers refrain from spending on anything but the bare necessities. Consumer spending accounts for about two-thirds of U.S. economic activity.
June consumer confidence, due on Tuesday from the Conference Board, a private research group, is projected to dip from May's levels.
An index of pending home sales for May will be closely watched after recent housing market reports suggest the sector's recovery could stall with the expiration of a federal tax credit for first-time home buyers that was created to fire up housing demand.
The reality of it is the recession is not over and whether it's a double dip or a straight line with no growth, that appears to be more the reality than the hype of recovery, said Carl Birkelbach, chairman and chief executive of Birkelbach Investment Securities in Chicago.
For the week, the Dow Jones industrial average <.DJI> fell 2.94 percent, while the Standard & Poor's 500 Index <.SPX> lost 3.65 percent, and the Nasdaq Composite Index <.IXIC> slid 3.74 percent.
The Dow is down 2.73 percent for the year, while the S&P 500 is down 3.44 percent and the Nasdaq is off 2.01 percent.
Political risk will also be on investors' minds next week.
After U.S. lawmakers hammered out an historic overhaul of financial regulations in Friday's early morning hours, President Barack Obama urged world leaders to follow his lead on regulatory reform at the G20 summit in Canada over the weekend.
READING THE ECONOMIC MENU
Wall Street's menu of economic data will be full in the week ahead. The precursors to Friday's jobs report are the ADP survey on Wednesday, expected to show private-sector employers added 60,000 jobs in June, and weekly initial jobless claims on Thursday. New claims are expected to fall slightly to 450,000. The forecasts are from economists polled by Reuters.
The week will kick off on Monday with May personal income and consumption, or spending, data. Both are seen up a tick.
The Conference Board's June index of consumer confidence, due on Tuesday, is expected to slip to 63.0 from May's 63.3 after three consecutive months of gains.
Purchasing managers' indexes, or PMIs, will be watched for signs of strength in the manufacturing sector. Readings on New York state and the U.S. Midwest, represented by the Chicago PMI, are due on Wednesday.
The Institute for Supply Management, or ISM, index on U.S. manufacturing activity, due on Thursday, is expected to show that manufacturing continued to expand in June, but at a slightly slower pace than in May. The employment components of the regional PMIs and the ISM's manufacturing index will be eyed carefully ahead of the non-farm payrolls data.
An index of pending home sales, set for release on Thursday, is expected to provide more evidence of a slowdown in housing. The forecast calls for the index to drop 12.5 percent in May -- a sharp reversal from April's gain of 6 percent to hit a six-month high.
This week, a Commerce Department report showed new home sales tumbled a record 32.7 percent in May to the lowest level in at least four decades. While a drop was expected, due to the expiration of a federal tax credit for home buyers at the end of April, the number was worse than thought and helped sap momentum from an already risk-averse market.
This second half is going to be without stimulus, with housing down, with employment continuing to go down and the consumer continuing to get whipped, said Birkelbach.
Domestic car and truck sales for June, forecast to decline slightly, also will be released on Thursday.
Volatility could rise next week, with fund managers selling their losers and buying winning stocks to adjust their portfolios at the end of the quarter.
Volume usually drops before the long weekend to mark the Independence Day holiday and that could increase volatility. With July 4th falling on a Sunday this year, the financial markets will be closed for the holiday on Monday, July 5th.
If you don't have a lot of volume at the end of the week, you could always have big moves off of low volume, said Tim Holland, co-portfolio manager of Aston/TAMRO Diversified Equity Fund in Alexandria, Virginia. You could have a smaller number of participants move things.
That could make for some tense moments with traders focused on market technicals after the S&P 500 failed to hold above its 200-day moving average during the week. Some investors see a move below that level as a bearish signal.
Michael Sheldon, chief market strategist at RDM Financial Group in Westport, Connecticut, said the market would likely be range bound in the weeks ahead.
It looks like we're stuck in this trading range, with the downside around 1,040 to 1,050 and upside capped by the 50-day moving average, which right now is around 1,127, he said.
MODEST EARNINGS GROWTH
S&P 500 companies' earnings are expected to grow 26.8 percent in the second quarter, according to Thomson Reuters research.
Next week will see some early earnings reports from S&P 500 corporations, including Micron Tech , General Mills , Apollo Group , and Monsanto Co .
Positive results from Oracle buoyed stocks that struggled for direction after Friday's mixed economic data on first-quarter gross domestic product and consumer sentiment. Oracle's stock shot up 2 percent to $22.66.
Earnings season will start in earnest after Alcoa Inc , one of the 30 stocks that make up the Dow, reports results on July 12.
(Reporting by Edward Krudy and Matthew Lynley; Additional reporting by Chuck Mikolajczak and Caroline Valetkevitch; Editing by Jan Paschal)