Stocks stuck in range, with oil over $126

By Jennifer Coogan

NEW YORK (Reuters) - Stocks are within spitting distance of crossing a milestone next week that could propel the market out of its trading range, but surging oil prices and economic uncertainty pose major obstacles.

So far this month, stocks have managed to hang on to the gains made during the April recovery as the first-quarter earnings season passed without many shocking disappointments, despite the credit crisis and slackening economy.

All three major indexes came close this week to topping their 200-day moving averages, a level that would signal positive momentum.

"That's the yardstick people use to measure the big-picture trend. They put a lot of importance on that in the equity market," said Bill Strazzullo, chief market strategist at Bell Curve Trading in Boston.

But as the earnings season winds down, the market will have to take more of its cues from economic indicators such as retail sales and CPI, and other assets such as currencies and commodities, rather than corporate profits.

Investors may be more inclined to book tidy profits earned since the March lows, than wait and see how the data pans out.

"What people are realizing is that we've had a great run and they'll get out of positions they're not comfortable with. There's been a fair amount of skepticism about the rally," Strazzullo said. "The volume on the upside wasn't the greatest, which tells you a lot of people never bought into the fact that things are appreciably better."

CRUDE SHOCK AND CONSUMERS' WALLETS

Oil's swift ascent this week past the $126-per-barrel level took some steam out of equities, with the Dow ending the week down 2.4 percent, the S&P 500 down 1.8 percent and the Nasdaq off 1.3 percent.

"Oil is a huge story. The consumer cyclicals are already counted out," said Manny Weintraub, founder of money management firm Integre Advisors in New York. "It's not new news, it's just more bad news for the average consumer."

Just how badly consumers are being affected by higher pump prices may be further revealed on Tuesday, when the Commerce Department reports April retail sales.

Several dozen chain stores reported their own monthly numbers earlier this week, with the majority posting an improvement from a year earlier. Discounters fared particularly well as cash-strapped consumers sought out bargains.

At the tail-end of the earnings calendar are several major retailers, beginning with Wal-Mart Stores Inc (WMT.N) on Tuesday. Investors will pay particular attention to the world's largest retail chain for any outlook about how consumers are spending the government stimulus checks that taxpayers are beginning to receive.

Department store Macy's Inc (M.N) reports its quarterly results on Wednesday, ahead of rivals J.C. Penney Co Inc (JCP.N) and Nordstrom Inc (JWN.N) on Thursday.

The Consumer Price Index, set for release on Wednesday, looms large in investors' minds. The data will show whether higher food and fuel prices are trickling through the economy and sending the cost of other goods higher.