NEW YORK - The dollar’s rebound and oil’s tumble breathed some serious optimism into Wall Street last week. But no one knows for sure yet whether the two trends are truly antidotes for what’s been ailing the stock market.
This week, investors will be focusing again on the U.S. currency and the energy markets, but also on retail industry reports to gauge consumer spending.
Consumers would certainly benefit from lower food and fuel costs, but they also still face falling home prices, huge debt loads and an uncertain job market. If it appears that they are struggling severely, the recent decline in energy prices might not be enough to sustain a stock market rally.
On Wednesday, the Commerce Department reports on retail sales in July, after spotty sales figures released by individual retailers last week. According to the median estimate of economists surveyed by Thomson Financial/IFR, the data is likely to show flat sales for the month compared with June, when retail sales jumped by 1 percent.
Some major retailers are also releasing their quarterly results this week. Those companies include Wal-Mart Stores, Macy’s, JCPenney Co., Kohls Corp., Abercrombie & Fitch Co. and TJX Cos., which operates T.J. Maxx and Marshalls.
Last week, the Dow Jones industrial average rose 3.60 percent, the Standard & Poor’s 500 index rose 2.86 percent, and the Nasdaq composite index rose 4.46 percent. All three major indexes posted their biggest weekly gains since April.
A huge chunk of the gains came Friday, when the U.S. dollar soared against its main rival currencies. That helped drive the stock market’s rally, and a sell-off in commodities ranging from crude oil to gasoline to corn to soybeans.
But there are many economists who say the weak dollar has actually been what’s keeping the United States from sliding into a severe recession. The reason is exports — when the dollar is low, U.S. goods are cheap to foreigners.