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For a moment, US stocks looked like they were headed for a long-awaited pullback this week. But that didn't happen. After more signs of a healthier economy, stocks may have room to run higher in the week ahead.
The benchmark Standard & Poor's 500 Index registered another week of gains yesterday, its fifth in six weeks, once again defying calls for a reversal in its five-month rally.
Yesterday also marked the three-year anniversary of the S&P 500's plunge to a 12-year low, a move that was followed by a sharp rally. The S&P 500 still is up 102 per cent from that low.
"Everyone's looking for a correction here, which just tells me we're probably going to have another little run up before we get that correction," said Scott Billeaudeau, portfolio manager at Fifth Third Asset Management in Minneapolis.
Much of the optimism has come from signs of further improvement in the US economy. Yesterday's stronger-than-expected jobs report - the most widely watched US economic indicator - gave the stock market more wind in its sails.
The S&P 500 ended the week with a gain of 0.1 per cent, even though on Tuesday, it marked its weakest day so far in 2012 on concerns about a default by Greece on its country's debt.
Still, yesterday's news of a technical default by the country was mostly brushed aside by investors. A derivatives group said Greece triggered the payment on default insurance contracts by using legislation that forces losses on all private creditors.
"While concerns about Greece aren't going away, the worst-case scenario has been averted, and the payroll report is another reason for investors to be confident," said Leo Grohowski, who oversees about $171 billion in client assets as chief investment officer at BNY Mellon Wealth Management in New York. Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, said US stocks may still sell off in the near term, but it's not likely to be a drastic decline.
"There's so much cash in institutional portfolios, in individuals' portfolios," said Trunow, whose firm manages about $13 billion in assets.
So much money "left equity asset classes and then went elsewhere for safety," she added. "I think the long-term move is on the upside."
Technically, the market is hovering near key resistance levels, which could influence next week's direction, said Chris Burba, a short-term market technician at Standard & Poor's in New York.
A push above 1,376 by the S&P 500 could suggest further gains ahead, while holding at or below that level could indicate more selling, he said.
Speculation that the Federal Reserve may announce more quantitative easing has kept some investors upbeat, but there has been nothing to suggest that the Fed will change its policy.
The Federal Open Market Committee, the Fed's policymaking panel, is scheduled to meet on Tuesday, with a statement expected afterwards.
February retail sales, due on Tuesday morning, will be among the most-watched reports in the week ahead. That data, due on Tuesday, is expected to show that last month's retail sales rose 1 per cent, according to economists polled by Reuters, compared with a gain of just 0.4 per cent in January.
Excluding autos, February retail sales are forecast to have risen 0.7 per cent, matching January's gain.
With oil prices well above $100 a barrel, investors will take note of February inflation data next week when the Producer Price Index (PPI) and the Consumer Price Index (CPI) are released. The PPI report is due on Thursday, followed by CPI yesterday.