Unless next week's payrolls report is an outlier, investors should expect a continuation of the directionless market that has kept the S&P 500 trading in place for most of the year.
Should July post strong job gains, it would point to an economy strong enough for the Federal Reserve to raise interest rates for the first time in almost a decade.
But concern about the strength of the economies in China and Europe, along with a slide in energy prices, have made stocks stall. U.S. oil futures fell more than 20 percent in July, the largest monthly drop in almost seven years.
"We're likely to be in first gear, crawling forward, not dramatically faster, essentially flat for the year or up a little, depending on which index you use," said Kate Warne, investment strategist at Edward Jones in St. Louis.
Since it first closed above 2,100 almost six months ago, the S&P 500 has not deviated from that level more than 3 percent on the downside or 2 percent higher. Its 100-day moving average is 2,096 and it has been effectively flat for a full month. It closed Friday near 2,104.
Concern over a market topping near its record is evidenced by $2.8 billion in outflows from U.S.-based domestic-focused stock funds last week, their second straight week of withdrawals, according to Lipper data.
Those flows are, however, balanced by stock purchases from companies themselves, which are on track to break the buyback record set last year.
"There's so much money piled up on both the bullish camps and the bearish camps. Companies have been buying back more stock than ever, and investors have been selling just as aggressively," said Brian Reynolds, chief market strategist at New Albion Partners in New York.
With both sides pulling the string, the S&P 500 could be stuck in this tight range for the rest of the year, much like it was in 2011 after gaining 39 percent in the previous two years. Following a near-64 percent gain from 2012 to 2014, a pause is arguably healthy.
PAYROLLS SEEN KEEPING TREND
Current estimates for the payrolls report are for the U.S. economy to have created 222,000 jobs in July, compared with 223,000 in June. Only a significant surprise in the jobs print would shake the market out of that balance.
"A good payroll number is a positive to the economy but it means the Fed will be more likely to raise rates, so the result in the stock market could be indeterminate," said Reynolds. He cites a break up or further down in energy prices as the other likely reason for the market to awake.
Despite concern that higher rates could drive investors away from equities, some are seeing the Fed's expected move as freeing stocks from a cloud of uncertainty, setting the stage for more gains.
"The realization the Fed is going to raise interest rates and it doesn't hurt anything is what I think breaks us out," said Art Hogan, chief market strategist at Wunderlich Securities in New York.
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