Source: The Canadian Press

The rally stock markets have been enjoying since the beginning of the month seems to have stalled, and analysts say it will take some very positive data to get investors excited again.

“The bulk of the improvement that we’ve seen this month is really a recoil to the dismal performance in August,” said Andrew Pyle, investment adviser with ScotiaMcLeod in Peterborough, Ont.

“But in order for the rebound to be extended, you’ve got to have numbers continually coming in better than expected.”

This September — traditionally the weakest month of the year for equity markets — has defied its reputation with a flourish. The TSX has gained 2.1% so far this month, while the Dow Jones is up an even more impressive 5.9%.

However, the rally hit the brakes last week, with the TSX inching up 0.6% and the Dow up 1.4% as investors wait for companies to begin reporting third-quarter earnings.

“You’re going to find investors unwilling to place aggressive bets ahead of these fresh earnings numbers that are going to be coming out in the next few weeks,” Pyle said.

This week, investors will be keeping a close eye on a slew of U.S. housing data in the hope that the real estate market is finally starting to bounce back.

But “any improvement off abysmally low readings for home sales will only reflect how deep the plunge has been after the expiry of tax incentives,” commented Avery Shenfeld, chief economist with CIBC World Markets.

That plunge was underscored last week when foreclosure listing firm RealtyTrac Inc. said lenders repossessed more homes in the United States in August than in any month since the start of the subprime mortgage crisis.

This week, an index measuring the confidence of home builders will be released Monday, followed by data on housing starts Tuesday, home prices on Wednesday, existing home sales on Thursday and new home sales on Friday.

Pyle said the housing data could prove to be “the pivot number for the month.”

“It’s quite possible that in the latest round of numbers we may actually see a pickup, whether it’s in sales activity or maybe even starts,” he said.

“I think if we were to see that, that might be enough to give the market that added lift.”

Canada economic data scheduled to be released this week include consumer price numbers on Tuesday and retail sales data on Wednesday.

The U.S. Federal Reserve’s interest rate announcement is also scheduled for Tuesday. It’s widely assumed that the weak economy will prompt the Fed to leave its key lending rate at its historic low of 0.25%, but investors will be listening carefully to any change in language.

Chairman Ben Bernanke indicated at the end of August that the Fed was prepared to make a major new investment in government debt or mortgage securities if the economy worsened significantly or if the Fed detected deflation.

This cheered investors at the time, but there has been a marked improvement in the economic data since then.

“I don’t think the Fed is going to do anything substantive,” said John Johnston, chief strategist of the Harbour Group at RBC Dominion Securities.

“At best they’ll repeat their promise to do something, and markets are probably going to say, ‘Well, we want some action.’ So I’m inclined to be a bit cautious going into this week.”

As the rally stalls and investors grow more cautious, it’s going to take a lot to push markets higher, Johnston added.

“To push the rally further, you’d need to be very pleasantly surprised,” he said. “The risk is that markets interpret any outcome from a somewhat negative perspective.”