Wall Street Looks to Earnings, Jobs to Keep Rally (ext: ABCNews)

After soaring on upbeat corporate earnings and forecasts, Wall Street might be able to stay positive even as there are signs that the economy is still struggling.

Investors enter the week after an extraordinary rally that gave the Dow Jones industrials their best month since October 2002 and their best July in 20 years. All the major indexes gained nearly 1 percent last week and touched their highest levels since last fall.
Dozens of major companies issued better-than-expected second-quarter earnings reports or promising outlooks for the rest of the year. But some traders remain cautious, as shown Tuesday when they received a weaker-than-expected consumer confidence reading and Friday, when they reacted coolly to word from the Commerce Department that that the economy shrank at a slower pace than expected in the April-June quarter.
"We are starting to see a bullish sentiment creep into the market, as we have had a strong run recently," said Michael Sheldon, chief market strategist at RDM Financial Group in Westport, Conn. "A majority of positive earnings news is behind us, so it wouldn't be surprising at all, in fact it might be healthy for the market, to see a brief pullback to refresh and bring new investors back into the market."
On Friday, the Labor Department is expected to report that the unemployment rate rose in July to 9.7 percent, eclipsing June's 26-year high of 9.5 percent. But the market may be able to take an increase in stride because the Federal Reserve has already warned that joblessness is likely to surpass 10 percent this year and stay well above healthy levels for years.

There is keen interest in what the department has to say about the number of jobs lost last month. Economists expect job losses to have slowed, with about 340,000 jobs cut in July. That would be an improvement from June's 467,000 and less than half the 741,000 slashed in January.
"What we have seen over the last five months has been a steady improvement, stabilization," said Phil Orlando, chief equity market strategist at Federated Investors. "If we can keep that going, we are on our way."