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Investors will closely eye President Barack Obama's State of the Union address on Wednesday for his take on the economic recovery and the status of negotiations towards lifting the US debt ceiling as he details plans for his second term in office.
Last week's market action showed just how easily investor confidence can be shaken – and reclaimed – at the moment.
"I think we're in the middle of a trading range and I'd put plus or minus 5 percent around it," Fred Dickson, chief market strategist at DA Davidson & Co, told Reuters. "Fundamental factors are best described as neutral."
At the end of a week that was dominated by resurfacing concern about Europe's handling of its sovereign debt crisis and reminders that the US economy remains fragile, the Standard & Poor's 500 Index closed at a five-year high, though the pace of the rally has eased somewhat.
Investors were buoyed on Friday by a mix of solid corporate earnings and agreement on a European Union budget.
Friday's economic data bolstered optimism about the world's largest economy. The US trade deficit in December shrunk to its narrowest in nearly three years, while a separate report showed that inventories at wholesalers recorded a surprise drop in December, declining for the first time in six months.
Meanwhile, earnings brought welcome surprises too. Companies including LinkedIn and AOL posted results that underpinned their value to investors, sending shares up more than 21 percent and 7 percent, respectively, on Friday.
About 75 percent of the 341 S&P 500 companies that have released results so far this reporting season have surpassed profit projections and 67 percent have beaten sales estimates, according to data compiled by Bloomberg.
Coca-Cola, Pepsi, CBS, Comcast, General Motors and Cisco are among the US companies next in line to report results.
In the past five days, the S&P 500 rose 0.3 percent to its best close in five years, while the Nasdaq Composite Index advanced 0.5 percent to the highest close in 12 years. The Dow Jones Industrial Average ended 0.1 percent lower.
Scheduled for release this week are the monthly Treasury budget, due late on Tuesday, retail sales, import and export prices, and business inventories, all set for Wednesday, and industrial production, due on Friday.
Europe's benchmark Stoxx 600 Index suffered a 0.3 percent drop for the week, though the biggest news came after markets closed on Friday.
Unexpectedly, European leaders agreed on a regional 2014-20 budget, fuelling optimism that the eurozone is finding ways to unite and find consensus on austerity measures.
The deal, still subject to approval by European Parliament, set the new budget at 960 billion euros, down from 994 billion euros in the 2007-13 budgets, marking the first decline in spending.
"We simply could not ignore the extremely difficult economic realities across Europe, so it had to be a leaner budget," Herman Van Rompuy, the president of the European Council, told a news conference on Friday. "For the first time ever, there is a real cut compared to the last multiannual financial framework."
The agreement came a day after European Central Bank president Mario Draghi hinted an interest rate cut might be ahead if the euro continues its appreciation, warning that "the exchange rate is not a policy target, but it is important for growth and price stability".
His comments should be a topic of discussion at a meeting of Group of 20 finance ministers and central bank officials in Moscow on Thursday and Friday. Also on the agenda is expected to be a debate about defending currencies, in particular the yen.
"There is a significant risk that while the G-20 will support Japan's right to ease policy, it may ask Japan to stop talking about the currency," Callum Henderson, global head of foreign exchange research at Standard Chartered, told Bloomberg.