This stock market is down but not out

The U.S. stock market will have a lot to digest in the week ahead. As one of the most miserable corporate earnings seasons in recent memory winds down, there are still plenty of economic data points and the Federal Reserve guessing game to keep investors busy even as appetite for stocks remains depressed.

Investors dumped $44 billion worth of stocks in the last five weeks, the biggest reported drop since Aug. 11, according to analysts at Bank of America Merrill Lynch. “The markets look better than they feel,” the analysts said.


U.S. stocks ended the week on a sour note Friday with the SP 500

SPX, -0.85%

  down 17.62 points, or 0.9%, to close at 2,046.49, it’s lowest closing since April 11.The Dow Jones Industrial Average

DJIA, -1.05%

 dropped 185.18 points, or 1.1%, to finish at 17,535.32. The Nasdaq Composite

COMP, -0.41%

 declined 19.66 points, or 0.4%, to close at 4,717.68. The SP 500 and the Dow are down for a third straight week while the Nasdaq logged its fourth weekly loss.

But Jeffrey Saut, chief investment strategist at Raymond James, isn’t fazed by the losing streak. Saut, who has been comparatively more upbeat about stocks than most analysts, maintained his glass is half-full tone in his latest report. “We are in the process of making a meaningful low,” he said, predicting buying interest to revive when the SP 500 inches closer to 2,040 points.

Here is a rundown of what to watch for as the market heads into the third week of May.

Earnings:

With some 90% of SP 500 companies having reported first-quarter earnings, 71% have turned in bottom-line numbers that are better than mean estimates, according to FactSet. However, this may be more due to subdued expectations than improved performance.

“For first quarter 2016, the blended earnings decline is negative 7.1%. The first quarter marked the first time the index has recorded four consecutive quarters of year-over-year declines in earnings since fourth quarter 2008 through third quarter 2009,” said John Butters, senior earnings analyst at FactSet.

FactSet

Investors are also expected to get further clarity on whether the weakness weighing on upscale brands like Macy’s Inc.

M, +0.03%

 and Nordstrom Inc.

JWN, -13.42%

 is also affecting more price-competitive retailers when Wal-Mart Stores Inc.

WMT, -2.86%

 announces its results next week. Analysts surveyed by FactSet expect Wal Mart to report earnings of 88 cents a share on revenue of $113.1 billion.

Other retailers on tap to release earnings are Home Depot Inc.

HD, -0.79%

Lowe’s Cos.

LOW, -0.52%

Staples Inc.

SPLS, +0.85%

and Target Corp.

TGT, -2.28%

Networking giant Cisco Systems Inc.

CSCO, -0.52%

a Dow component, is scheduled to report on Wednesday.

Economic Data:

It will be data-heavy as far as economic indicators go but among the most closely watched will be the consumer price index and the core CPI for April, due on Tuesday, with economists warning that accelerating inflation will be a harbinger of an imminent Fed rate hike.

The release of Industrial output and capacity utilization data for April on Tuesday will allow investors a further glimpse into the health of the U.S. manufacturing sector while the jobless data on Thursday will also be closely scrutinized.

The Federal Reserve:

Will they or won’t they?

Several Fed officials have suggested recently that the central bank will have to hike interest rates if the economy continues its steady pace of recovery despite assurances from Chairman Janet Yellen that any rate decision will be handled with kid gloves.

“The April FOMC minutes, released on Wednesday afternoon, are likely to strike a more balanced tone than the dovish meeting statement. This is because various FOMC participants have made comments over the past several weeks emphasizing policy flexibility and the Fed’s expectation that output growth will rebound after a soft first quarter,” said Joseph Lavorgna, chief U.S. economist at Deutsche Bank, in a note.

Crude oil:

The rise and the fall of the crude oil is both a boon and a curse for the U.S., depending on who’s talking. But given its status as a key commodity, stocks are expected continue taking take their cue from oil prices. In the short term, oil may get a boost from production outages in Canada and Nigeria against the backdrop of a supply glut.

June West Texas Intermediate crude

CLM6, -0.71%

 fell 49 cents, or 1.1%, to settle at $46.21 a barrel on the New York Mercantile Exchange.

U.S. dollar:

The greenback recovered from its recent soft patch with the U.S. Dollar Index

DXY, +0.44%

, a measure of the dollar against a basket of major currencies, up 0.8% for the week. Bank of America Merrill Lynch strategists last month had predicted that the next big move in the currency market will be a resumption of the U.S. dollar’s rally. If so, that will be another obstacle for stocks as a strong buck makes U.S. goods more expensive overseas and hurt companies with significant global exposure.

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