A growing sense of economic optimism has lifted shares since the March 9, multi-year lows that many market pros think represent a bear market bottom.

But last week brought more bad news than good in the form of weaker-than-expected reports on retail sales, housing and weekly jobless claims.

In addition, Chrysler said it was cutting around 25% of its dealerships and GM announced that it was cutting the first 1,100 of what is expected to be a 40% cut of its dealerships. GM remains on the brink of bankruptcy as it struggles to gain concessions from creditors and its union by the end of the month.

Investors took all the news as a collective hint that maybe Wall Street has gotten a bit ahead of itself in betting that the worst is over.

The week ahead brings uncertainty as investors sort through reports on housing, leading economic indicators, jobless claims and a slew of profit reports from retailers.

"There's a lot coming up in the week ahead to either confirm that we're recovering or rolling over and softening again," said Phil Orlando, chief equity market strategist at Federated Investors.

He said that after stocks, as represented by the S&P 500, gained more than 35% in nine weeks, the market was due for a healthy pullback. Last week may have been it, but there could be a bigger retreat brewing over the next few weeks.

Monday: Lowe's (LOW, Fortune 500) is due to report quarterly results before the start of trading. The home improvement retailer is expected to have earned 25 cents per share, versus 41 cents a year ago.

Tuesday: April reports on housing starts and building permits are due. Housing starts are expected to have risen to a 527,000 unit annual rate from a 510,000 unit annual rate in March.

Building permits, a measure of builder confidence, are expected to have risen to a 530,000 unit annual rate from a 516,000 unit annual. rate in March.

Lowe's competitor Home Depot (HD, Fortune 500) is expected to report earnings of 28 cents per share before the start of trading, down from 41 cents a year ago.

After the close, Hewlett-Packard (HPQ, Fortune 500) is expected to report a profit of 86 cents per share versus 87 cents a year ago.

Wednesday: Retailer Target (TGT, Fortune 500) is expected to report a profit of 59 cents per share, down from 74 cents a year earlier, when it releases results in the early morning.

Treasury Secretary Timothy Geithner is expected to testify before the Senate Banking Committee about the government's bank bailout plan.

The minutes from the late-April Federal Reserve policy meeting are due for release. At that meeting, the central bank opted to hold rates steady at historic lows near zero, but issued a more optimistic outlook on the economy than it had in recent weeks.

Thursday: The April index of leading economic indicators is due in the morning. LEI is expected to have rise 0.6% after falling 0.3% in the previous month.

The weekly jobless claims report from the Labor Department is due before the start of trading. The Philadelphia Fed index, a regional manufacturing report, is due after the start of trading. 

 

NEW YORK (CNNMoney.com) -- Stocks rallied Thursday, bouncing back after several down sessions as investors weighed some weaker-than-expected reports with growing economic optimism.

The Dow Jones industrial average (INDU) gained 46 points, or 0.5%. The S&P 500 (SPX) index rose 9 points, or 1%. The Nasdaq composite (COMP) gained 25 points, or 1.5%.

The S&P and Nasdaq fell for three sessions in a row and the Dow fell for two of the last three sessions as investors stepped back after the earlier spring rally.

But on Thursday, investors used the recent selloff as an opportunity to dip back into stocks, particularly technology, telecom and consumer issues.

Bets that the economy is closer to stabilizing has fueled the recent rally, lifting all three major gauges by more than 30% over 9 weeks. But a few recent reports have raised worries that investors may have gotten ahead of themselves, including Wednesday's weak retail sales report and Thursday's surprise rise in jobless claims.

"The thinking today is that we have had a couple of bad numbers, but they are not enough to derail the perspective that conditions are not as bad as they have been and are getting better," said Phil Orlando, chief equity market strategist at Federated Investors.

"The question going forward will be whether these were random reports or an indication of a reversal," he said. "There will be other disappointing reports, but I think the trend is still toward improving data."

Government reports are due in the morning on consumer prices, manufacturing, capacity utilization and industrial production and consumer sentiment.

Company news: Chrysler said it wants to close 789 dealerships, or roughly 25% of those in business, according to a plan filed in bankruptcy court.

General Motors (GM, Fortune 500) is expected to announce Friday that it will close 1,000 to 2,000 of its dealerships, according to reports.

GM said Thursday that it has agreed to accelerate payments to its parts suppliers, as it teeters closer to bankruptcy. The automaker has until the end of the month to gain enough concessions from its creditors and union to remain viable. However, GM is not expected to meet that deadline and the company's CEO has said that a bankruptcy is "probable."

Wal-Mart Stores (WMT, Fortune 500) reported higher quarterly earnings that met estimates on weaker revenue. The No. 1 retailer also forecast second-quarter earnings in a range that could surpass analysts' current forecasts. Shares fell 1.9%.

Market breadth was positive. On the New York Stock Exchange, winners topped losers by seven to three on volume of 1.52 billion shares. On the New York Stock Exchange, advancers beat decliners by two to one on volume of 2.23 billion shares.

Economy: The number of Americans filing new claims for unemployment last week surged to 637,000 from 601,000 the previous week, the Labor Department reported. The rise in jobless claims reflects the extensive layoffs in the auto industry after Chrysler filed for bankruptcy.

Economists surveyed by Briefing.com had expected 610,000 new claims.

The Producer Price index (PPI), a measure of wholesale inflation, rose 0.3% in April after falling 1.2% in March, according to a government report released Thursday. PPI was expected to rise 0.2%.

The so-called core PPI, which strips out volatile food and energy prices, rose 0.1% in the month, as expected, after holding steady in the previous month.

Bonds: Treasury prices inched higher, lowering the yield on the benchmark 10-year note to 3.10%, down from 3.11% Wednesday. Treasury prices and yields move in opposite directions.

Other markets: In global trading, Asian and European markets ended lower.

In currency trading, the dollar fell versus the euro and gained against the yen.

U.S. light crude oil for June delivery rose 60 cents to settle at $58.62 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery climbed $2.50 to settle at $928.40 an ounce.