Stock Rally Showing Signs of Faltering

U.S. stocks look set to drift lower this week as the markets’ 11-month rally shows signs of running out of steam.

Investors are looking for fresh reasons to buy stocks, and some are concerned that the rally has pushed prices too high.

“The stock market hit a new wall of worry,” said Frederic Dickson of fund firm D.A. Davidson & Co., as the major indexes racked up small losses last week. “Aggressive risk takers in the market are beginning to back off and rotate into higher-quality stocks or move some high-risk money temporarily into cash.”

The volume of shares traded on both the New York Stock Exchange and Nasdaq -- a powerful indicator of the public’s interest in the stock market -- has dipped below the 90-day average over the last week or so.

Technical analysts said this was a sign that the 11-month rally was starting to lose momentum.

In the coming week, investors will be combing through corporate and economic numbers to find signals to hold on or cash in on gains.

In corporate news, retailers take center stage as the fourth-quarter earnings period tails off. Dow component Home Depot Inc., the world’s largest home improvement store, reports Tuesday. On Thursday, companies reporting include leading retailers Gap Inc., J.C. Penney Co. and Limited Brands Inc.

Federal Reserve Chairman Alan Greenspan, who is scheduled to testify on U.S. economic policy before the House Budget Committee on Wednesday, also will keep investors on high alert.

When Greenspan spoke in Washington recently, his hints that the Fed would not raise interest rates anytime soon from their 1958 lows sent stocks to a 32-month high.

Market-moving economic data are scheduled for later in the week, with durable-goods orders and weekly initial jobless claims set for Thursday.

Friday, preliminary figures for fourth-quarter gross domestic product will be released. Economists predict that GDP grew at an annualized pace of 3.6% in the fourth quarter, according to a Reuters poll, compared with 4% in the third quarter.