So far this year, economic data has been mixed, but worrisome overall, and that has made for a turbulent stock market. And investors are bracing for more of the same — for some time to come.
Last week, the Dow inched up 0.27 percent, the Standard & Poor's 500 index rose a modest 0.23 percent and the Nasdaq composite index dipped 0.79 percent. The three indexes are all down sharply for the year, and there's no sign yet of a true rebound in the stock market.
"Could it fall further? Sure," said Hans Olsen, chief investment officer in JPMorgan's private client services. He noted that particularly troubling news could easily push the S&P back under the 1,300 mark, a level it briefly sunk below in January.
It's possible for the stock market to end the year with decent returns, Olsen said, but "to say we're getting a bottom here might be premature."
Stock markets generally fall 30 percent, peak to trough, during a recession, said Christian Menegatti, lead analyst at the economic and financial Web site RGE Monitor. So it's quite possible, he said, depending on how weak the economy gets this year, for stocks to fall another 15 percent.
The biggest drag on the economy has so far been, of course, the housing market.
The National Association of Realtors reports Monday on sales of existing homes last month. According to the median estimate of economists surveyed Friday by Thomson Financial/IFR, existing home sales expected to have slipped by about 1 percent in January from December. Then on Wednesday, the Commerce Department reports on sales of new homes, which are anticipated to have slipped modestly in January.
Wall Street is concerned with not only sales, but inventories, which are at very high levels because demand is so weak. The housing market can only start bouncing back once inventories start edging lower — something that many analysts don't expect to happen for a while.
But a cash-strapped consumer is also a problem.
The government releases its readings on consumer spending and income on Friday, with both expected to rise by 0.2 percent. Anything below those levels could raise red flags for investors.
And inflation worries remain — the consumer spending report's inflation measure is forecast to come in at 2.2 percent, year-over-year, which is above the Federal Reserve's unofficial comfort zone. And last week, the Labor Department's consumer price index showed higher-than-expected upticks.
On Tuesday, the Labor Department issues its reading on prices at the wholesale level. The Producer Price Index is expected to have risen 0.3 percent in January after falling 0.1 percent in December, and the core index, which excludes food and energy, is expected to have risen 0.2 percent, the same as the prior month.
While the consumer is struggling, businesses are having a hard time offsetting that weakness.
Wednesday, the Commerce Department reports on orders of durable goods, which are expected to drop about 3.5 percent after rising 5.2 percent in December. And the Chicago Purchasing Manager's Index — considered a precursor to the Institute for Supply Management's U.S. manufacturing report next week — is expected to show that activity was flat, perhaps even contracting, in February.
What Fed Chairman Ben Bernanke implies the central bank's monetary policy during his testimony to Congress on Wednesday and Thursday could provide some short-term direction.
But doubts about the effectiveness of interest rate cuts in the tight credit markets — not to mention the gloomy tone Bernanke adopted during his last congressional appearance — could keep investors on edge for a while. Although rates have come down fairly sharply, banks have become less willing to lend and housing demand is low.
"You can make money cheap. You can't necessarily make people take out mortgages, or have institutions want to lend that money," Olsen said.
