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Wall Street: What It's Looking For This Week

Wall Street surged higher last week, but that's cold comfort to people whose stock portfolios are still down more than 10 percent this year.

The week's better than expected earnings news, which helped the Street claw itself out of bear market territory, was hardly definitive.

Quarterly results from some of the big banks came in above forecasts, but expectations were extremely low. Crude oil prices retreated from record highs, but are still up more than 70 percent since last summer.

To be sure, some investors are hoping last week's developments were the first signs the economy would improve later this year or early next year — and after all, the stock market is considered a leading indicator. But with the housing market still sinking — not to mention several more corporate earnings left to report — it's hard for many investors to justify big bets on an upswing.

"I think the epicenter of the whole thing has been, and continues to be, housing prices," said Bob Andres, chief investment strategist for Envestnet.

This week, with quarterly losses expected from Wachovia and Washington Mutual due to defaulting mortgages, the market will also get data on existing home sales and new home sales. The National Association of Realtors is expected to report that sales of existing homes fell in June, according to the median estimate of economists polled by Thomson Financial/IFR. Economists believe the Commerce Department will report that new home sales also declined last month.

One of the dilemmas is that while home prices are falling, mortgage rates have barely budged. Another problem is that home prices have fallen so far that it's not just subprime that's causing losses for the nation's money centers — it's also alt-A mortgages, which make up a much bigger portion of all U.S. mortgages. Alt-A mortgages are given to borrowers with slightly spotty credit history or little documentation.

And home prices are still tumbling at a fast pace, according to recent reports from Standard & Poor's/Case-Shiller and the Office of Federal Housing Enterprise Oversight. "You've got to walk before you run here — you've got to get stabilization first," Andres said.

The Dow Jones industrial average ended last week up 3.57 percent; the Standard & Poor's 500 index rose 1.95 percent; and the Nasdaq composite index rose 1.71 percent.

This week, investors will be curious to see whether oil prices keep falling — they closed below $130 a barrel Friday — and if other earnings are coming in strong. Hoards of major companies release their quarterly reports this week, including Bank of America, American Express,Merck,Pfizer, Caterpillar,United Parcel Service, Yahoo,Boeing,McDonald's, Pulte Homes, and 3M.

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In economic data, the Conference Board releases its June index of leading indicators on Monday. Economists forecast a modest decline of 0.1 percent.

On Wednesday, the Federal Reserve releases its Beige Book, which describes economic conditions in various parts of the country.

The Labor Department will issue its weekly report of initial jobless claims on Thursday, and the market anticipates a rise.

And Friday, the Commerce Department reports on durable goods orders and the University of Michigan releases its reading on consumer sentiment. Orders for durable goods are expected to have fallen 0.4 percent in June compared with May, and sentiment is expected to have dipped slightly in July compared with June.