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Wall Street resumes its inflation watch this week with key gauges on producer and consumer prices set for release.
Stock investors also may start making a holiday checklist when US retailers will round out the third-quarter earnings season as they report results and discuss the outlook for Christmas sales.
With congressional elections out of the way, analysts say there is reason to be optimistic about the coming holiday shopping season.
"The fall in gas prices has psychologically been better for people and the unemployment rate is very low, so there are people out there who can spend," said Scott Vergin, portfolio manager at Thrivent Financial in Minneapolis.
"Plus, with Rumsfeld out, there's hope things will change for the better with the war and that may help sentiment during the Christmas season," he said, referring to US Secretary of Defence Donald Rumsfeld's resignation on Wednesday, a day after the Democrats' big election victory.
Rumsfeld said he quit because the political climate changed after the Democrats' win, which was driven by anger over the Iraq war.
The Democratic sweep of Congress in the mid-term elections prompted some investors to worry that it would bring about a wave of legislation unfriendly to various business sectors.
Still, stocks achieved their best weekly performance in a month.
"A tone will come out of Washington of co-operation or friction. In some parts, friction and gridlock is favourable to the markets - don't make any new laws and let's have a stable environment," said Robert Lutts, chief investment officer of Cabot Money Management.
On Friday, stocks ended the week higher. The blue-chip Dow Jones industrial average finished the week up 1.02 per cent at 12,108.43, while the S&P 500 advanced 1.22 per cent for the week to close on Friday at 1380.90.
The Nasdaq gave its best performance in two months, with a weekly gain of 2.53 per cent. It ended Friday at 2389.72.
Fred Dickson, director of retail research at D.A. Davidson said he believes the October readings on the producer price index and the consumer price index will be fairly benign.
"We'll probably continue in a trading range environment, with the Dow holding in the 12,000 level, may be even a little higher."
- REUTERS
