NEW YORK (MarketWatch) -- After a better-than-expected jobs report helped the market overcome worries of an impending correction, U.S. stocks might benefit next week as investors return en masse from summer break after a long weekend.
U.S. markets will be closed on Monday in observance of Labor Day, which traditionally marks the end of summer and a period of lackluster trading as money managers get back to business.
"For some time, market players have wanted a correction," said Jim Paulsen, chief investment officer at Wells Capital Management. "But they just can't get it because the [economic] numbers are too good."
Still, "when people come back next week, I hope to see volumes return more strongly," Paulsen said.
Many market participants have called for stocks to pull back after a nearly uninterrupted six months' rally that has lifted the S&P 500 index by more than 50%.
And the start of a correction -- which many would describe as a 10% or bigger pull-back -- seemed to be in the works over the past week, until a slightly better-than-expected August jobs report shook investors out of their funk.
Markets were first skittish after the U.S. Labor Department said the unemployment rate jumped to 9.7% in August from 9.4% in July. Economists had forecast a rise to 9.5%.
But investors in the end focused on the trend of smaller monthly job losses throughout this year. Nonfarm payrolls contracted by 216,000, less than the 233,000 decline projected by economists. In addition, average hourly earnings rose for a second-month in a row. See full story.
Friday's rise only partially offset losses from earlier in the week. The Dow industrials still finished down 1% for the week, the S&P 500 index fell 1.2%, and the Nasdaq was off 0.5% from the previous Friday.
"Nothing so far has derailed this market," said Robert Pavlik, chief market strategist at Banyan Partners.
With September statistically a bad month for stocks and given the strong and rapid gains since March, the market should be nervous and expecting a correction, he said. "But the further we go into September without pulling back, the more people will get drawn in. There are still a lot of people out there that want to own stocks and might see any pull-back as reason to jump in as the economic outlook continues to improve."
Jobs still in play
On tap on the U.S. economic calendar next week will be July consumer credit numbers for July on Tuesday.
On Wednesday, the Federal Reserve will release its Beige Book of economic conditions, and July trade numbers will be released on Thursday.
On Friday will be wholesale inventories and sales numbers for July, along with the Treasury's August budget figures, and the University of Michigan consumer sentiment survey for August.
But the highlights for many seasoned investors will be the weekly tally of jobless claims on Thursday, which can provide a clearer and fresher snapshot of unemployment.
"Next week, the claims numbers will remain paramount," said Paulsen of Wells Capital. "It's the leading economic indicator for the market right now and we could either see them go back up to 600,000 and create anxiety for the market, or resume their trend lower."
G20
U.S. markets could also show a delayed reaction to the meeting of G20 ministers in London Friday night and Saturday. The gathering might provide clues on which countries are closer to start soaking up liquidity injected in the system to boost economies.
No immediate withdrawal of government support is foreseen, however, in light of the still-fragile nature of the recovery despite signs of an earlier-than-expected recovery in some areas. See full story.
Still, while the European Central Bank earlier this week was clear that it is way too early to start removing stimulus measures, the U.S. central bank has been more ambiguous.
"The Treasury and the Fed seem to be purposely ambiguous about reducing the stimulus that's out there," said Banyan's Pavlik.
"They're playing it pretty close to the vest," he said. "The one thing that we do know is that their purchase of Treasurys will be ending next month, and this might put some pressure on bonds, and force yields to rise."
In addition, should the U.S. be perceived as ending stimulus measures before others, the dollar might strengthen, which could hurt exports, as well as pressure the price of dollar-denominated commodities, Pavlik said.
