For stock investors, June's job report could be a make-or-break factor next week in determining whether the recent rally has legs or not.
The non-farm payrolls data will come out on Thursday, instead of the usual Friday. United States markets will be closed on Friday, July 3, for the long Fourth of July, or Independence Day, holiday weekend.
Investors will pick apart the job figures and reams of other economic data released during this four-day week to assess if recent signs of stabilisation point to a sustainable economic recovery. Consumer confidence, the Institute for Supply Management's June index on US manufacturing activity, and domestic car sales are among the major indicators on tap.
Although the US economy has been mired in a recession since December 2007, investors' optimism has increased since early March amid growing signs that the extent of the economic slump is moderating.
That optimism has provided a crucial underpinning to stocks since the S&P's 500 Index hit a 12-year closing low on March 9. This spring, the S&P 500 climbed as much as 40 per cent from that low; at Friday's close, it was still up 35.8 per cent.
While unpleasant surprises may trigger a long-awaited correction, analysts said evidence of further economic stabilisation would make the bulls grow bolder and help stocks break out of their recent consolidation range.
"It is going to depend a lot on where the surprise is," said Peter Jankovskis, Co-Chief Investment Officer at OakBrook Investments in Lisle, Illinois, referring to the non-farm payrolls data.
"In the last report, people looked at the fact that the decline in payrolls was not nearly as large as expected, but the unemployment rate jumped tremendously. At the end of the day, that jump trumped things."
US non-farm payrolls are forecast to lose 355,000 jobs in June versus May's slide of 345,000, according to economists polled by Reuters.
The US unemployment rate is projected to jump to 9.6 per cent in June from 9.4 per cent in May.
"We think that a spike in the rate of unemployment could actually be positive, as it may signal that discouraged workers are coming in from the sidelines and starting to look for work again," said Phil Orlando, Chief Equity Market Strategist at Federated Investors in New York. "There may be something else that plays out next week, a sort of portfolio window dressing effect. There's still a ton of cash sitting on the sidelines right now."
At Friday's close, the three major US stock indexes finished the week mixed. The blue-chip Dow Jones industrial average slipped 1.2 per cent, while the S&P 500 dipped 0.3 per cent, and the Nasdaq gained 0.6 per cent.
Holiday-shortened weeks tend to be volatile.
At the closing bell on Tuesday, Wall Street will write "finis" on trading for both the month of June and the second quarter. So there could be even more choppiness amid so-called "window dressing" next week. That ritual calls for money managers to dump some losers and snap up recent standouts to spruce up portfolios – and their quarterly returns.
Besides the focus on the economy, the holiday-shortened week will feature what promises to be a big spectacle – the sentencing on Monday of confessed swindler Bernard Madoff for running a $65 billion (Dh238bn) Ponzi scheme.
In addition to the US Labour Department's June jobs data, other reports to watch next week will include Tuesday's S&P/Case-Shiller reading on April home prices, the Chicago Purchasing Managers Index of June business activity in the US Midwest, and the Conference Board's June consumer confidence report.
The ADP national employment survey for June is due on Wednesday, along with the Institute for Supply Management's June reading on manufacturing, May pending home sales, May construction spending and June domestic car and truck sales.
On Thursday, there will also be weekly initial jobless claims, which in recent weeks have also tended to reinforce some hope of stabilisation, and data on May factory orders.
"It seems that the market is at least comfortable with the fact that the economy is on the horizon of the recovery. It's certainly not getting any worse," said Cleveland Rueckert, market analyst at Birinyi Associates in Stamford, Connecticut.
"Our research shows that the market typically bottoms at the end of the recession, so confirmation of that will fuel continued gains. We're bullish long term."
With the start of the second-quarter earnings season looming, investors will keep an eye out for companies' outlooks or pre-announcements. Aluminium producer Alcoa is due to kick off the earnings season when it reports on July 7. The Federal Reserve speakers' roster includes a speech by Federal Reserve Bank of St Louis President James Bullard on the Fed's exit strategies on Tuesday, the very same day that Federal Reserve Bank of Kansas City President Thomas Hoenig speaks on bankruptcy and financial crisis.
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