With stock prices at record highs, bulls will try to keep the rally running in the week ahead despite the summer doldrums.
The and Nasdaq closed at all-time highs Friday after July's strong jobs report shook up skeptics who believe the economy is slowing down and the labor market has seen its best days.
There are a few important earnings reports in the week ahead, including Disney — and retailers, like Macy's, Nordstrom and Kohl's. Monthly retail sales data for July, coming up Friday, tops the U.S. economic calendar, but traders will also be watching overseas as China releases trade data Monday, inflation Tuesday and retail sales and industrial production Friday.
The S&P 500 ended Friday at 2,182, a gain of 0.9 percent on the day, and a break out of the range it's been stuck in for three weeks. The July employment report's 255,000 nonfarm payrolls, together with June's strong report, bumped the three-month average to 190,000, wiping out concerns about May's below-trend 24,000 payrolls.
"It's like deja vu. A month ago we had a hot jobs number and the market broke out. Since then, it was a choppy range-bound tape. Earlier this week, there were concerns with oil, and the fact that it is August, a bad month for stocks," said Scott Redler, partner with T3Live.com. "There's been a healthy rotation between tech and biotech, playing catch-up. The banks are grabbing at the baton. If you read the market versus the headlines, there's a lot more to like in the market than what people are saying about it."
Redler said there seems to be room to go higher, and earning season helped when leaders like Amazon.com and Apple had good results. "I don't think the market goes blockbuster. Maybe [S&P] 2,230ish. It's August. There's not a lot of power behind it, and it'll probably be very stock specific," he said. "You still have a bout of skepticism, which typically means we could go higher here."
Sam Stovall, chief U.S. equity strategist at S&P Global Market Intelligence, said the concurrent records in the S&P, Nasdaq and the S&P SmallCap 600 index are sending positive signals for stocks. The small-cap Russell 2000 also rallied Friday, jumping 1.4 percent, breaking out of its three-week range.
"That's a bullish sign. Historically, it has been. I think the market was looking for some sort of catalyst, because second-quarter earnings season has pretty much run its course," said Stovall. He noted that earnings for the S&P 500 are down about 2.5 percent for the quarter, but much better than the decline of 5.5 percent that was expected. "Right now, the second-half earnings are supposed to be shaping up to be a V-shaped recovery. I think the payrolls numbers made investors feel things are starting to look better."
Stovall said one of the next issues is for the market to reconcile the sluggish GDP growth with what appears to be a healthy job market. But the second half should see better growth, after the first half's sluggish 1 percent growth rate. "We expect to see an average 2.4 percent for each of the next four quarters," he said.
Steve Wieting, global chief strategist at Citi Private Bank, said also important to watch in the coming week will be oil. "We should be very much watching the intersection between petroleum and other asset prices, following the giveback we've had. It doesn't reflect how far along the world had adjusted to lower prices, and the rebalancing of supply and demand," he said.
West Texas Intermediate crude gained 0.5 percent to $41.80 per barrel for the week, but it has fallen before the key psychological $40 level in recent sessions.
Wieting said retail sales are the important data to watch in the week ahead, and he said the jobs data was encouraging. "We see labor demand and supply growing at comparable rates. That's good news," he said.
But Wieting did say he is neutral on U.S. equities. "If there were just macro economic signals, we'd be more optimistic, but we're just taking a little more neutral stand because of politics," he said, adding there is also political risk for Europe, as it grapples with Brexit and the growth of nationalism.
"The point is that political transitions have some economic risks, and I think that's regardless of who comes into office. With a new congress, there are transition risks," he said.
Wieting said the presidential election clouds the outlook and has increased uncertainty, which economists say can slow growth.
"If you look at 11 recessions since World War II, eight of them have overlapped in a president's first year in office," he said.
Wieting said the concerns exist, but still there is an attraction to U.S. stocks. "U.S. dividend yields are higher than two-thirds of the world's investment-grade bonds of every maturity," he said. He also noted that a third of all sovereign yields globally are negative.
Monday
Earnings: Dean Foods, Tyson Foods, Sotheby's, News Corp, Chemours, Clovis Oncology, Nuance Communications, Rackspace
Tuesday
Earnings: Disney, SolarCity, Coach, Valeant, Norwegian Cruise Line, Red Robin Gourmet Burgers, Scripps Networks, Mylan Laboratories, WageWorks, Yelp, CyberArk
6 a.m. NFIB survey
8 a.m. Productivity and costs
10 a.m. Wholesale trade
1 p.m. $24 billion three-year note auction
Wednesday
Earnings: Michael Kors, Ralph Lauren, Wendy's, Shake Shack, Blue Buffalo, Flowers Foods
10 a.m. JOLTS
1 p.m. $24 billion 10-year note auction
2 p.m. Federal budget
Thursday
Earnings: Alibaba, Macy's, Kohl's, Nordstrom, Petrobras, Planet Fitness, Ruby Tuesday
8:30 a.m. Initial claims
8:30 a.m. Import prices
1 p.m. $15 billion 30-year auction
Friday
8:30 a.m. Retail sales
8:30 a.m. PPI
10 a.m. Consumer sentiment
10 a.m. Business inventories