RPT-Wall St Wk Ahead-Stocks on brink of breakout, profits key

(Repeating item that initially moved on Friday)

By Leah Schnurr

NEW YORK, July 25 (BestGrowthStock) – Wall Street enters this week
on the cusp of a breakout in U.S. stocks (Read more about the stock market today. ), but it will need
another spate of convincing earnings reports to feed the rally
that sprouted at the end of last week.

The markets endured malaise with poor economic data and
downbeat testimony from Federal Reserve Chairman Ben Bernanke
on Wednesday, but turned decisively after a number of strong
results pointed to better times ahead.

This week brings more results from bellwethers including
Chevron (CVX.N: ), DuPont (DD.N: ) and Boeing (BA.N: ). The trick
will be turning the whipsaw action into accumulated gains —
and hoped-for improvements in volume — that would signal an
upturn in sentiment.

“There’s a constant struggle between the bulls and the
bears when in fact the answer is in the middle ground. This
market is more like a turkey and not a bull or a bear,” said
Brian Jacobsen, chief portfolio strategist at Wells Fargo Fund
Management in Menomonee Falls, Wisconsin.

Investors have been forced to readjust their expectations
for the economy, with data showing the pace of the recovery has
gone from a sprint to a crawl.

It has also prompted a divisive argument over the
likelihood of an encore recession. But if worries over a double
dip are starting to be washed out of the market, an unexpected
positive could fuel the market higher.

STANDING ON 1,100

The broad S&P 500 also finds itself standing on top of a
key resistance level that could turn into a floor for the
market. The index closed at 1,102.66, just above the
psychologically important 1,100 level for the first time in a
month. The level has been a hard one to hold and could buoy the
market if the move is ultimately a decisive one.

With the S&P 500 edging out of official correction
territory, trading down about 9 percent from this year’s April
high, analysts appear to have reconciled themselves to a slower
recovery than they had hoped for. A correction is generally
defined as a 10 percent decline from the top.

“All the indicators still indicate growth, we’re just not
growing as quickly as we were when we were coming off the
bottom, and that makes total logical sense,” said Michael
O’Rourke, chief market strategist at BTIG LLC in New York.

O’Rourke added he believes the sell-off has run its course,
and the early July low will prove to be the low for the year.

Analysts will be hoping to see more earnings season cheer
from industrials companies this week after a slew of
manufacturers last week topped expectations and raised
full-year profit forecasts. See [RESF/US]

General Electric Co (GE.N: ) added positive sentiment to the
sector on Friday by raising its dividend 20 percent,
illustrating the conglomerate’s confidence it has put the worst
of the recession behind it. For details, see [ID:nN23241252]

Options traders are betting on positive momentum for Boeing
and DuPont following their earnings this week, said Andrea
Kramer, an analyst at Schaeffer’s Investment Research in
Cincinnati, Ohio.

Boeing’s 10-day call/put ratio shows investors have bought
calls over puts in the open market at a faster clip only 6
percent of the time during the past year. In DuPont, near-term
traders have been more optimistically aligned toward the stock
only 1 percent of the time during the past year, according to
Kramer.

The options market also points to wide overall price
movements this week as options volume continues to be low, said
Steve Claussen, chief investment strategist at online brokerage
OptionHouse.com in Chicago.

As of Thursday’s close, 13.8 million options traded
overall, versus 16.6 million in mid-June.

“Summer rallies start because of low volume, since not a
lot of people want to get in the way of selling anything, and
then it suddenly builds, as people say, it starts to chase
performance,” Claussen said.

ECONOMY IS WILD CARD

But the economy will remain the wild card, with the
potential to pour cold water on investor enthusiasm and a round
of top-tier economic data will be looked at to determine the
strength of the economic recovery.

The Federal Reserve’s Beige book of economic conditions
will also be scrutinized for any illumination of Bernanke’s
comment that the outlook is “unusually uncertain.”

Analysts will also digest the results of the European
stress tests on banks. But if Friday’s session is an
indication, market movement will likely be muted.

New home sales will kick off the week, with data expected
to show a rise to 320,000 units in June, according to a Reuters
poll of analysts. More housing data on Tuesday includes the
Case-Shiller home price index, which is expected to rise 4
percent year-over-year in May.

Also on Tuesday, consumer confidence is expected to come in
at 51 for July, a slight dip from the month before. Durable
goods orders on Wednesday are forecast to rise 1 percent in
June.

Weekly initial jobless gains on Thursday are expected to
ease to 460,000 from 464,000 the week before. Investors will
get another look at the consumer on Friday with the final July
reading of consumer sentiment, which is forecast to rise from
the preliminary July reading.

Lastly will be the first reading for second-quarter gross
domestic product. Investors are expecting the economy to grow
2.5 percent, compared with 2.7 in the first quarter. See
[ECI/US].
(The Stocks Outlook column appears every Sunday. Comments or
questions on this one can be e-mailed to
leah.schnurr(at)thomsonreuters.com)

Investing Analysis

(Reporting by Leah Schnurr; Editing by Kenneth Barry)

RPT-Wall St Wk Ahead-Stocks on brink of breakout, profits key