The Week Ahead: Rally On
A barrage of earnings reports, key inflation and housing data and two days of testimony from Fed Chairman Ben Bernanke are the backdrop this coming week for a market set on bounding higher
The stock market's red hot rally at the end of the past week was fired in part on expectation that global growth will continue to pump up earnings, and a slew of corporate report cards will be dealt out next week when banks, techs, airlines and others report quarterly results.
The coming week will also close out with an options expiration, which CNBC's Jim Cramer thinks will give a positive boost to the stock market.
"You've got to be long this market. It's just big," Cramer says. He expects to see some good earnings including a few nice surprises from dollar-related bump ups in some big multinational's results.
"What we saw this week was a broadening of the market that was very exciting," says Cramer. He says buying broadened out to familiar tech names and retail and the individual investor will now jump in. "You've got an accessible bull market."
It's hard to remember a week that had quite so many record breaking moves from individual stock names to indices cracking new highs, and not just in the U.S. but around the world. The biggest Dow move in four years came on Thursday, but perhaps more impressive was the return by the S&P 500 to its March, 2000 intraday high, a much quieter market moment Friday afternoon.
The Dow rose 2.2% or 295 points last week, its best performance since the week of April 20. Thursday's 283-point melt up balanced out Tuesday's 148-point dive and put the Dow into double digit gains for the year.
The S&P closed out the week at 1552, up 1.4%. The index hit a new intraday record of 1555, surpassing its former high of 1553 set on March 24,2000. The S&P 500 is up 9.5% so far this year. The Nasdaq also had a good week, finishing up 1.5% at a new 6-1/2 year high.
"Everything that needed to work is working," CNBC's Dylan Ratigan said about the market's big move up.
Earnings and Economics
The Dow is up 11.6% year to date and stands just 93 points shy of 14,000.
That big round number is key by the way, and CNBC will tell you why all day on Monday. In a sneak preview of CNBC's new Trillion Dollar Survey, we learned that 30% of the top Wall Street strategists and money managers surveyed said they expect the Dow to end the year closer to 14,500 than 14,000. The survey will tell us a lot of other important things too, like who Wall Street thinks should be president and what sectors will be the winners and losers this year.
That survey will be unveiled on Squawk Box Monday and covered on CNBC and CNBC.com throughout the day.
Earnings reports will come on strong, starting Tuesday with Dow components Coca-Cola and Johnson & Johnson. Merrill Lynch and Wells Fargo also report that day before the bell, and tech heavy weights Intel and Yahoo report after the bell.
On Wednesday, JP Morgan, Altria and United Technologies report in the morning, and eBay lands after the bell. Thursday is Bank of America's reporting day, along with Continental Air, Dow Jones, and Honeywell. Microsoft and Google report after the bell that day. On Friday Caterpillar, Citigroup and Wachovia weigh in.
"Regional banks are the big thing. There's a lot of question about what they're going to say about sub prime and overall mortgage exposure," said CNBC's Bob Pisani.
Inflation data, housing data and Fed meeting minutes are among the week's big economic events. Another highlight of course will be when Fed Chairman Ben Bernanke gives his Semiannual Monetary Policy report in front of the House Financial Services Committee on Wednesday and then Senate Banking on Thursday.
Inflation data in producer prices are released Tuesday and consumer prices are due Wednesday. On the housing front, housing starts for June are released Wednesday morning and the National Association of Homebuilders survey for July is reported at 1 p.m. Tuesday.
Fed minutes are released Thursday afternoon.
Other data includes initial jobless claims and leading indicators Thursday. On Monday, the Empire State manufacturing survey is released and on Thursday, the Philadelphia Fed survey is issued.
Oil gained 1.5% last week to $73.93. Crude is closing in on its all-time high of $77.03, a price it reached a year ago on July 14, 2006. CNBC contributor John Kilduff, senior vice president of Man Financial, says he's sticking to his forecast that oil will make a new high this summer and hit his target of $83 per barrel before dipping back down toward the end of the year.
"Demand is remaining very strong. The economy is very strong, and the falling dollar is helping to push up prices," he says. "The global economy continues to hum and even the IEA (International Energy Agency) continues to weigh in with their global demand projections. And there's plenty of geopolitical jitters that could affect supplies in coming months." The IEA predicted on Friday that demand will grow more quickly in 2008 than this year.