Stocks to track oil, PPI and bank results
NEW YORK (Reuters) - Should oil prices extend their pullback and data show no further deterioration in the U.S. economy, stocks could rise next week. But investment banking results will be the wild card.
The U.S. Federal Reserve's increased discomfort with inflation will also curb investors' enthusiasm, with the May Producer Price Index set to give the latest measure.
Major Wall Street investment banks Goldman Sachs (GS.N), Lehman Brothers LEH.N and Morgan Stanley (MS.N) are expected to post poor results next week, hampered by more write-downs and a sizable loss at Lehman.
The May PPI report, due for release on Tuesday, tops the data list, followed by May housing starts, May industrial production and a reading on the first quarter's current account. All of those numbers are on Tuesday's agenda.
Also crucial in setting the market's tone will be Thursday's weekly jobless claims and a survey of economic conditions in the Mid-Atlantic region by the Federal Reserve Bank of Philadelphia.
"The market's been oscillating ... with each move synchronized by daily volatility in the crude oil futures market. We see that pattern continuing," said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co. in Lake Oswego, Oregon.
"The market will probably continue to remain inflation focused with PPI coming up. Our take is that investor reaction to the CPI was that it could have been worse."
U.S. front-month crude ended the week down 2.7 percent.
On Wall Street, stocks finished higher for the day, with the Dow up 1.4 percent on Friday, the S&P 500 up 1.5 percent and the Nasdaq up 2.1 percent.
For the week, though, the market's performance was mixed: The Dow Jones industrial average .DJI rose 0.8 percent, while the Standard & Poor's 500 .SPX dipped 0.1 percent and the Nasdaq Composite Index .IXIC fell 0.8 percent.
THE FED'S INFLATION FIXATION
Friday's gains were driven by some reassuring news on the inflation front. A government report on the U.S. Consumer Price Index showed that underlying price pressures were muted in May, easing fears of inflation and a near-term rise in interest rates.
Despite relentless rises in oil and food prices recently, investors bet that statistics that point to no runaway inflation would allow the Fed to keep interest rates steady.
To spur an economy hamstrung by the housing market's slump and losses in the financial sector from the mortgage crisis, the Fed has slashed its benchmark interest rate by 3.25 percentage points since mid-September 2007 to 2.0 percent currently.
"I think we're probably still stuck in a fairly broad trading range with 1,240 to 1,250 on the S&P at the bottom and 1,500 to 1,525 on the upper end," said Craig Hester, president and chief executive of Hester Capital Management in Austin, Texas. Continued...
