Investors are heading toward the final month of the year with more questions about the economy than they had just a few weeks ago.
The uncertainty, which follows some downbeat reports on housing and employment, will likely mean choppy trading, especially as volume dwindles during the holiday season.
In this week, which will be abbreviated due to Thanksgiving, investors will look to reports on home sales, unemployment and consumer confidence and the start of the holiday shopping season on Friday for more insight into the direction of the economy.
The government also will revise its early estimate of the gross domestic product that said the economy grew at an annual pace of 3.5 percent during the third quarter. Many analysts now expect a smaller increase in GDP because of recent reports on housing and retail sales.
If more reports signal a slow economic rebound, investors could continue selling stocks and buying safe-haven assets like the dollar and short-term Treasurys, as they did last week.
Stocks fell from 13-month highs during the latter half of last week on disappointing housing reports and worries about a slump in demand at technology companies. The Dow Jones industrials ended the week with a paltry 0.5 percent gain, while broader indexes finished with losses. And the three-month Treasury bill's yield briefly turned negative, which meant that investors were willing to in effect pay the government to park their cash in a safe place.
Investors have again become more cautious about risk after months of taking advantage of record low interest rates to borrow cheaply and pump money into stocks and commodities. Uneven reports showing small improvements in some industries like manufacturing but still weak numbers in areas like employment and housing, have investors worried that the recovery will be slow and subdued. Not wanting to risk losing the big gains they've amassed since March, investors are locking in profits and padding their portfolios with more safe havens.
"It's a two steps forward, one step back continuum here," said Matt Lloyd, chief investment strategist at Adivsors Asset Management. "The economy is recovering, but not in every area."
Still, the market's moves have been orderly, and analysts say that some consolidation is warranted, even healthy, after a 61.3 percent rise in the Standard & Poor's 500 index since early March.
"At some point, you've got to have that shift from enthusiasm over what was based on unquestionably good news, back to the recognition that this can't keep up indefinitely," said Jim Baird, partner and chief investment strategist at Plante Moran Financial Advisors.
Concerns over the direction of the dollar and when the Federal Reserve might raise interest rates could put more pressure on stocks through the end of the year. With anxiety about the economy running high, demand for the dollar may increase. A stronger dollar is bad for commodities producers and exporters because it makes their goods and services more expensive overseas. And U.S. companies that do business in foreign markets make less money when their earnings are translated from other currencies into dollars.
But the Fed has pledged to keep interest rates low for the foreseeable future to support the economy's recovery, which should keep a lid on the dollar for the time being.
Still, the dollar is sensitive to many outside forces. Last week, the dollar got a boost after European Central Bank President Jean-Claude Trichet said the ECB plans to start reining in some of its stimulus programs.
Which direction stocks and the dollar take next depends on what this week's reports have to say about the economy. Many analysts are expecting the data to continue to be mixed, which could lead to erratic trading.
"I wouldn't be surprised to see back and forth (trading)," Lloyd said. "When you have that much data, you usually bounce around."
The week will start with figures on September home sales from the National Association of Realtors. Also Monday, investors will likely keep a close watch on quarterly figures from computer and printer maker Hewlett-Packard Co. for any signs of improving demand after a disappointing outlook from Dell Inc. last week.
The following day, the Commerce Department will release its revised GDP figure. Investors will also get the Standard & Poor's/Case-Shiller index on home prices for September and the third quarter, as well as the Conference Board's reading on consumer confidence for November. Additionally, the Federal Reserve will issue the minutes from its most recent policy meeting.
Wednesday brings government reports on durable goods orders, personal income and spending and new home sales, as well as the Labor Department's weekly report on initial claims for jobless benefits.
And Friday marks the start of the holiday shopping season. The day after Thanksgiving, commonly known as Black Friday, is traditionally considered the day when a surge of shoppers pushes retailers into the black for the year.
While retail sales have shown some improvement, forecasts for this year's holiday season are conservative. Analysts expect intense competition among retailers as they struggle to attract shoppers who are still worried about losing their jobs and paying their bills.