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Investors wait for economic data

NEW YORK (Reuters) — US stock investors will look to a slew of economic data next week to sustain Wall Street’s recovery, but lingering worries about the economy and the subprime mortgage market could create more jitters.Critical among next week’s data will be two reports on consumer sentiment, which could shed light on how the recent turmoil in the subprime lending market is affecting the view of the economy.

There will also be reports on new-home sales, US durable goods orders and gross domestic product.

Investors also will keep an eye on further developments in the Middle East after news on Friday that Iranian forces seized 15 British sailors and marines. The news sent US crude oil prices above $62 a barrel.

“I think the bigger concern on investors’ minds other than earnings growth at this time is actually economic growth, whether subprime issues are going to spread through the rest of the economy, and if it does, what impact is that going to have on the economy,” said Michael Malone, trading analyst at Cowen & Co. in New York.

Stocks have retraced more than 80 percent of the losses from the selling that ensued after the market’s plunge on Feb. 27. But analysts said stocks could experience more volatility as economic worries persist. The Feb. 27 sell-off was triggered by a fall in Chinese stocks. Deterioration in the subprime mortgage sector, which makes loans to borrowers with shaky credit, has added to market turmoil.

On Friday, the Dow Jones industrial average and the Standard & Poor’s 500 index ended slightly higher as a rise in oil prices boosted energy stocks. Oil’s gain, however, kept a lid on the broad market.

The Dow Jones industrial average rose 19.87 points, or 0.16 percent, to end at 12,481.01. The Standard & Poor’s 500 Index edged up 1.57 points, or 0.11 percent, to finish at 1,436.11. The Nasdaq Composite Index dipped 2.81 points, or 0.11 percent, to close at 2,448.93.

For the week, the S&P 500 gained 3.5 percent, its biggest weekly rise since March 2003. The Nasdaq rose 3.2 percent for the week, while the Dow advanced 3.1 percent.

Much of the market’s recovery occurred this week, particularly on Wednesday, when the Federal Reserve left interest rates unchanged and dropped language about possible rate increases, a move that investors interpreted as leading to a rate cut.

But the Fed said it remained cautious about inflation, and investors have been reassessing expectations about the central bank’s next policy move since Wednesday.

Investors are concerned about how the fallout from housing could affect economic growth, while oil prices, which rose 59 cents to settle at $62.28 on Friday, remain a worry.

“There’s general nervousness about the level of economic growth and where it’s headed,” said Owen Fitzpatrick, head of US equity group at Deutsche Bank Private Wealth Management in New York.

Investors are eager for signs of stability in housing following the rising delinquencies and foreclosures in the subprime mortgage sector, which makes loans to people with weak credit or low income.

Next week’s economic data probably will influence views on where the economy is headed, starting with the Commerce Department’s report on Monday on new-home sales for February. Economists in a Reuters poll forecast that sales rose to an annual pace of 985,000 units in February from 937,000 in January.

The report follows Friday’s existing-home sales data, which showed an unexpected rise in sales last month. But the data also indicated that prices have stagnated and the inventory of unsold homes has increased.

On Tuesday, the Conference Board’s Consumer Confidence Index for March is due. Economists forecast a reading of 108.5, down from 112.5 in February.

Wednesday’s data includes durable goods orders for February. Durable goods orders have a strong connection to consumers’ willingness to spend because these products include refrigerators, washing machines and other big-ticket items meant to last three years or more. The consensus forecast is for a 3.5 percent gain in overall durable goods orders. But the expected rise is only 1.6 percent when the transportation sector is excluded.

The last look at fourth-quarter gross domestic product is due on Thursday. GDP is the output of all goods and services within US borders.