...The week ahead offers hazards. The Federal Reserve, which meets Tuesday and Wednesday, will make history when it discloses its outlook on interest rates for the first time. The government will report on new-home sales for December and fourth-quarter economic growth.
...
When the week ended, the Dow was up 2.4% for the week and 4.1% for the month. The S&P 500 had a 2% weekly gain and is up 4.6% for the month. The Nasdaq, up 2.8% for the week, is up nearly 7% for the month.
Which leads, of course, to the question: How long can this rally keep goin' on? This is where the skepticism comes in. The U.S. stock market is up better than 20% since its intraday lows on Oct. 3, 2011. The economy has hardly been so robust. The jobs market is starting to gain some traction, thanks in large part to auto manufacturing.
But job growth is anemic. Friday's gross domestic product report will show perhaps modest gains. And Europe's problems -- and the potential for another financial panic -- haven't gone away. If Greece and its private bond holders can't get a restructuring deal, markets may react badly.
China is still a question mark, and the potential for a blow-up with Iran that would push crude oil to, say, $200 a barrel, is still with us.
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There are signs the housing market has at least bottomed. Friday's existing-home sales report showed a 5% gain. Single-family building permits have risen for five of the last six months. Homebuilders are starting to feel a little confident, and mortgage applications are rising.
If this sounds loopy, given that the national unemployment rate is 8.6%, let us consider 1983, when building permits jumped 60%. The unemployment rate was 10.4% in January 1983 and averaged 9.6% for the year. A housing recovery can start when the jobs market looks weak. That's because those who are working start to think they WON'T lose their jobs.
There is, of course, a big overhang: all those foreclosures. They will weigh on the markets. But the ultimate effect will be to ensure affordability for some time.
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The Fed and history
In the week's most important economic event, the Federal Open Market Committee, the Fed's rate-making body, will meet Tuesday and Wednesday. There won't be any change in interest rates in the short term. What will be of interest are two things:
How the central bank releases its guesses on interest rates, inflation and possibly a target for the unemployment rate. This is something entirely new for the Fed. For years, it moved interest rates up or down and didn't tell anyone. This new policy may roil bond markets until everyone gets used to it.
Will the Fed engage in another round of quantitative easing -- buying Treasury securities to boost the economy? There's lots of talk about it. Don't bet on it. There's too much opposition inside the Fed because of worries about inflation.
The Fed will announce its rate decision at 12:30 p.m. ET Wednesday, and Chairman Ben Bernanke will hold a new conference at 2:15 p.m. ET.
The other economic reports
It's a busy week for economic events overall. Here's what's on tap:
State of the Union address, Tuesday evening. President Barack Obama will lay out his legislative program, and more battles will start.
Pending home sales index, due Wednesday from the National Association of Realtors. This is a check on contracts that are signed but not yet closed.
Mortgage applications, due Wednesday from the Mortgage Bankers Association. Application rates, especially for refinancings, have been rising in recent weeks.
The Federal Housing Finance Administration 's November home-price index, due Wednesday. This may well show a small decline.
Durable-goods orders, due Thursday from the Commerce Department. This will be a mediocre report once aircraft orders for Boeing are stripped out.
New-home sales, due Thursday from the Commerce Department. Look for a small gain, but sales are still running at record-low levels.
Gross domestic product for the fourth quarter, due Friday from the Commerce Department. The economy grew at a 1.8% rate in the third quarter. Most economists are looking for a 2.8% to 3% rate for the fourth quarter.
Reuters/University of Michigan Sentiment Index, due Friday. Look for a reading of 74, same as in early January. That's up from 69.9 in January. You can see improved consumer moods in auto sales, the housing numbers and the stock market rally. But rising gas prices may keep the exuberance in check.
Check here for MSN Money's economic calendar.
Earnings: Apple, CSX, McDonald's, Boeing and others
This is one of the biggest weeks of the fourth-quarter earnings season.
The big report will be Apple's for the first fiscal quarter, due after Tuesday's close. Look for gaudy gains in sales of iPhones and iPads and perhaps Macintosh computers. The big question is whether the gains have been priced into the stock already.
The shares hit an all-time high of $431.27 on Thursday but finished the week at $420.30, little changed for the week but up 3.8% for the month after rising 26% in 2011.
The week looks like this:
Monday: CSX (CSX -1.00%), Halliburton (HAL -0.14%), Texas Instruments (TXN -0.53%) and Zions Bancorp. (ZION +0.80%). Halliburton is important to oil-and-gas stocks. It's up nearly 5% this month after falling 15% in 2011. TI is one of the biggest suppliers of chips used in cellphones.
Tuesday: Dow components DuPont (DD +0.04%), McDonald's, Johnson & Johnson (JNJ +0.12%), Verizon Communications (VZ -0.08%) and Travelers Companies (TRV +2.14%). Plus Norfolk Southern (NSC -0.87%), magazine publisher Meredith (MDP +1.82%), Peabody Energy (BTU +0.29%) and Yahoo (YHOO -0.99%). And, of course, Apple.
Wednesday: Boeing, oil giant ConocoPhillips (COP -0.10%), defense contractor General Dynamics (GD +0.36%), Netflix (NFLX -3.11%) and chip-maker SanDisk (SNDK -0.36%). Boeing and Netflix will get the most attention; Netflix shares are up 57% since bottoming on Nov. 25. ConocoPhillips will offer a glimpse of what Big Oil earnings will look like. Take a look at General Dynamics' outlook on defense spending.
Thursday: Dow components 3M (MMM -0.17%), AT&T (T) and Caterpillar. Plus drug-maker Baxter International (BAX +0.11%), Juniper Networks (JNPR -3.73%), fertilizer maker Potash of Saskatchewan (POT -1.73%) and Starbucks (SBUX +0.27%). Starbucks shares are up 4.7% this month after rising 20.5% in 2011 and 25.8% in 2010. The question is if the big rebound from its crash in 2008 can be sustained.
Friday: Dow components Chevron and Procter & Gamble (PG +0.23%). Plus Ford Motor (F -0.16%), Honeywell International (HON -1.91%), homebuilder D.R. Horton (DHI -1.64%) and Southern Copper (SCCO -1.62%). If the economy really is beginning to gather strength, Procter & Gamble, maker of Tide and other consumer products, is vulnerable. Ford tells us how confident consumers are."
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