Key housing sector data may provide direction for Wall Street in the coming week as the market looks for confirmation of economic recovery and girds for the year-end holiday period.
Investors are expected to carefully monitor data on sales of new and existing homes for evidence that a recovery is on track in the sector at the epicenter of the financial crisis.
The main indexes closed out a mixed week ahead of a week marked by the Thanksgiving Day holiday on Thursday.
The Dow Jones Industrial Average edged up 0.46 percent on the week to 10,318.16, a third straight week of gains for blue chips.
But the technology-heavy Nasdaq composite fell 1.01 percent to 2,146.04 and the broad-market Standard & Poorâ€™s 500 index shed 0.10 percent to 1,091.38.
In the past week, the market was chilled by data showing a 10.6 percent slide in October housing starts, along with a drop of four percent in permits to build new homes, a leading indicator of the sector.
This makes data on existing home sales and new home sales more critical for investors, said Sal Guatieri at BMO Capital Markets.
â€œSeveral minor cracks are starting to form in the porous US housing market foundation,â€ he said.
â€œAfter making limited headway through the spring, homebuilder sentiment has stalled in recent months, with buyer traffic and prospective sales flat-lining.â€
With the two reports coming Monday and Wednesday, Guatieri said, â€œany disappointment could rock equities. A renewed slump in sales would almost certainly destabilize house prices â€” and fan recovery risks.â€
Another report that could influence the market will be Tuesdayâ€™s revised estimate for US gross domestic product (GDP) in the third quarter. Most analysts expect a revision to show 3.0 percent expansion from a first estimate of 3.5 percent.
Although the report is backward looking, it could provide clues on the nationâ€™s economic momentum coming out of recession.
Dean Maki at Barclays Capital said he expects the report to show a softer pace of growth at 2.5 percent.
â€œDespite the likely downward revision, we still believe that the third quarter will prove to be the first quarter of recovery and that it demonstrates a decisive turn in the economy,â€ he said.
â€œThe first estimate of third quarter corporate profits will also be released with this report. We look for another gain as a result of rises in output and prices, coupled with falling hours, worked.â€