NEW YORK (Reuters) - Investors hoping that U.S. stocks will build on a strong two-week run will look to a host of data next week, highlighted by the monthly jobs report, for signs the economy is improving. With a lackluster earnings season winding down, it will take some solid macroeconomic data to keep the momentum going on Wall Street.
The benchmark S&P 500 index .SPX has rallied roughly 5 percent in the past fortnight, its best two-week run in a year, and is up about 4 percent from its Feb. 11 low.
Those gains have come as recent data has diminished investor concerns over a recession and with oil prices showing signs of stabilizing around $30 a barrel.
“If you go back a couple weeks, it was really the positive retail sales report that kind of got us out of the funk,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
“Now that earnings reports are behind us, the economic data will take center stage.”
Nonfarm payrolls for February cap off the week on Friday and are expected to increase by 193,000 jobs, and the unemployment rate is forecast to hold at 4.9 percent. January’s report showed job gains slowed more than expected, although rising wages and the low unemployment rate indicated the labor market remains firm.
Also due next week are reports on activity in the manufacturing and services sectors from Markit, a data firm, and the Institute for Supply Management.
While manufacturing is expected to remain soft, the data will be eyed for signs the sector is close to bottoming.
Services activity data will be also be in focus after an early reading on Wednesday from Markit showed the sector, which had been a bright spot in the economy, contracted in February for the first time since October 2013.
“The services (report) is what you want to watch,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.
Hogan said investors were already prepared for a weak report on the manufacturing sector, but a reading on the services sector that offsets the soft preliminary reading would be welcomed.
However, should the data point to an economy that is gaining traction, it could also reduce enthusiasm for stocks, with a mid-March meeting of the Federal Open Market Committee on the horizon.
“(Payrolls) could actually hamper any further gains in the market,” said Peter Kenny, equity market strategist at Kenny & Co LLC, in Denver.
“People will look at that as an indicator that the Fed is more than less likely to move on rates, sooner rather than later.”
Volatility could also be heightened by politics, with the crucial Super Tuesday nominating contests looming next week.
Oil prices will continue to be a major factor for equities, and a rise of more than 25 percent in U.S. crude CLc1 since Feb. 11 has been a key ingredient in the advance of U.S. stocks off their 10-month low. Equities have been closely tied to movements in crude of late and another downturn in the commodity is likely to pressure stocks.
“Unfortunately, the machinations and volatility in oil is going to continue to be the tail that wags the dog,” said Hogan.
However, when the economic data is stronger than the negative influence of oil, one will see a divergence between stocks and oil prices, he said.
Editing by Linda Stern and Bernadette Baum