Thehas ridden a relatively smooth glide path to 14,000 since the end of December, and now traders are watching to see what's out there that could disrupt the road to new highs.
With a light week ahead for economic reports and the final major week of the earnings season, there is not much on the calendar in the week ahead to cause the stock market's bull to stumble.
"Next week my biggest fear is it's such a low news week that we may shift our focus to "sequester cliff" and those budget negotiations in Washington," said Art Hogan of Lazard Capital. The sequester is the automatic spending cuts that take place March 1 if Congress does not act. While some economists think the economy could weather the "sequester," there is an anxiety about it in the market and that could grow.
Since Congress punted the "fiscal cliff issues," the market has been humming along, with the Dow gaining 7 percent since Congress' New Year's Day tax votes. Congress since has voted to push off the debt ceiling debate until May, triggering a relief rally.
The Dow and S&P 500 have reclaimed the high ground, and are a short hop from all-time highs, but getting there may require more signs the economy is improving, and the recent data have been spotty. While January's ISM manufacturing data was stronger than expected Friday, nonfarm payrolls were a little light of expectations at 157,000. However, revisions to past months showed job growth at 200,000 in the fourth quarter, interesting considering how much worry there was about the "fiscal cliff" and its chilling effect on corporate activity.
There is also concern that as parts of the economy improve, the consumer is facing new headwinds, both from the rise in payroll taxes as of Jan. 1 and the recent jump in gasoline prices. The national average for unleaded gasoline has risen to $3.46 per gallon from $3.33 a week ago, according to AAA, and gasoline futures this past week rose more than five percent on the NYMEX as oil prices rose.
(Read More: What Dow 14,000 Means for Your Retirement Plan)
In the coming week, ISM non-manufacturing data are released Monday, and jobless claims are reported Thursday. Chain store sales will be watched for what they indicate about the consumer in January, after robust car sales Friday showed a still confident buyer. Disney, BP and Visa are among the companies reporting earnings.
Even with the indexes pushing to big round numbers, the move lacked the enthusiasm that often accompanies big milestones. Art Cashin, director of floor operations of UBS, said it will be important to watch the impact after investors read weekend news articles highlighting the market's move.
"Is it going to be the train is leaving the station syndrome?" he said.
If investors don't jump in based on the bullish market move, traders will "be looking for the trigger if there is one out there. I think they're going to start to worry about (the sequester). There could be severe cutbacks." Cashin said the first several days of the week will be key in terms of market behavior.
"Everybody's looking for something to make this market pull back," said Hogan. "There's nobody, that's not looking for something to make it pull back."
Stocks finished a fifth week of gains, with the Dow ending Friday at 14,009, just shy of its record 14,164, and the S&P 500 ended at 1513, about three percent below its record high of 1565. Treasury yields pushed higher this week, with the 10-year at 2.025 percent late Friday.
"I would say you still want to be on the long side," said J.P. Morgan chief U.S. equities strategist Tom Lee. "I know this is a maturing rally. Not that you should be ready to batten down the hatches, but we are going to go down. Let's be realistic, we've been rallying for a long time. Just for your own sanity, own some quality." Lee said he doesn't see the market pausing just yet, but it's coming soon, and he still thinks many investors are too underweight stocks.
Much is being made of a possible new dawn for individual investors, but some strategists say they don't see it. Scott Wren, senior equity strategist at Wells Fargo Advisors, said many investors he speaks to are still worried about losing principle and are underinvested in stocks, and overweight bonds and cash.
"The overwhelming theme is the same as it's been for the last three years: 'I don't care if I miss any upside, I just don't want to lose any money'… People don't want to lose money. You have all these baby boomers who have been hit hard twice in the last dozen years," he said.
In the last four weeks, equity mutual funds have taken in $20.7 billion, their largest four-week total since April, 2000, according to Lipper. In the last week, they took in $5.8 billion, and half of that went to domestic stock funds.
Lee said this is a sea change, but perhaps more psychologically important for the active managers who are seeing money flowing in for the first time in a long time. If it continues, "it's changing the mind-set. The psychological impact is substantial. There'll be more dip buying. I think the downside is more limited…it broadens the tape," he said.
But the economy has to prove itself for the market to carry much higher. The consensus view seems to be that stocks will stumble when Washington addresses fiscal issues, but pick up again as the economy improves in the second half. Even so, analysts expect risk assets to continue to benefit from the Fed's easy policies.
"I don't see a really accelerating economy or accelerating inflation in that period of time, so I think the market in that kind of environment can work higher, especially since these valuations have been low," Wren said.
(Read More: Gasoline Prices: Highest Ever for This Time of Year)
David Ader, chief Treasury strategist at CRT Capital, said the bond market is casting a wary eye at the equity market's moves, and that is partly why rates are higher. "The stock market doing what it's doing has caught us by surprise, and because it's doing that we have to rationalize it," he said. "And if you're going to find rationality for a strong stock market, you're going to find rationale for a weak bond market, and one thing reinforces the other."
"I don't think this is the start of the big bear market in bonds. It's the start of the big sideways market," he said.
What Else to Watch
The rose sharply in the past week, touching $1.37 for the first time since November, 2011 on Friday.
Deustche Bank currency strategist Alan Ruskin said he is watching central bank meetings in the coming week, particularly the European Central Bank meeting Thursday. ECB President Mario Draghi speaks at a briefing after the meeting. The ECB is not likely to take action, but Draghi's comments could have impact.
"I don't think the euro is going to soar ahead of that. There's some risk he's going to take a more dovish line than he took last time," Ruskin said. "I think he'll want to work against the uptick in short term interest rates you've seen in Europe."
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