"We have a market that appears to be a little nervous," said John Wilson, chief technical strategist at Morgan Keegan. "It still wants to move up, but there's been some disappointment about the rise in rates and drops in mortgage applications."

After a three-month run up, stocks ended little changed last week, although the Dow industrials and the S&P 500 did manage to eke out small gains.

The 10-year note yield hit 4% last week for the first time since October, as investors pulled money out of government debt. That sent mortgage rates up, which could stymie the housing market's path toward stabilization. Add a weak dollar, rising oil and gas prices and trillions of dollars in government stimulus flooding the system -- and worries about inflation are starting to surface.

This week's string of reports include housing starts and building permits, wholesale and consumer inflation, manufacturing and the labor market. Investors will also keep close watch on the bond market.

Most of the economic reports due are expected to show a moderate improvement over the previous reading, a trend in the economic news over the last few months that has helped propel stocks. But a slight improvement in the monthly reports is not to say a recovery is yet taking hold.

"What we've seen recently has reflected an end to the paralysis and panic phase of the cycle in the five or six months since Lehman's collapse," said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc.

"Things aren't as bad as they were, but that period was an aberration in terms of the pace of the slowdown," he said. "We're now back to the grind."

The Dow has now risen in 12 of the last 14 weeks, gaining nearly 33% for its best run since March 1975. The S&P 500's gain in 12 of the last 14 weeks is the best since the 1930s. Even so, the Dow ended Friday's session just barely higher for 2009, while the S&P 500 is up less than 5% year-to-date.

For stocks to move a lot higher, investors are going to need to start to see reports that show a recovery taking hold, not just the pace of a slowdown waning, the analysts said.

Monday: The Empire State index, a measure of manufacturing in the New York area, is expected to have worsened to negative 5.1 in June from negative 4.6 in May, according to a consensus of economists surveyed by Briefing.com. Any reading below zero shows the sector is contracting.

Health care will be in focus Monday. President Obama speaks about reform to the American Medical Association in Chicago. Also the Congressional Budget Office releases its estimates on the Kennedy health bill. The CBO's estimates are key since they are used by Congress in making legislative decisions.

Tuesday: May housing starts and building permits, from the Census Bureau, are both expected to show a slight improvement from earlier levels, as the housing market edges closer to stabilizing.

Housing starts are expected to have risen to a 483,000 unit annual rate in May from a 458,000 unit annual rate in April. Building permits, a measure of builder confidence, is expected to have risen to a 500,000 unit annual rate in May from a 498,000 unit annual rate.

The Producer Price Index (PPI), a measure of wholesale inflation, is expected to have risen 0.6% in June after rising 0.3% in May. The so-called core PPI, which strips out volatile food and energy prices, is expected to have risen 0.1% in June after rising 0.1% in May.

The Federal Reserve releases its reports on industrial production and capacity utilization shortly before the start of trading.

Wednesday: The Consumer Price Index (CPI) for May is expected to fall 0.9% after falling 0.7% in April. So-called core CPI, which strips out volatile food and energy prices, is expected to have risen 0.1% after rising 0.3% in May.

The first-quarter current account balance and the weekly oil inventories report are also on tap.

FedEx (FDX, Fortune 500) reports quarterly results in the morning. The package delivery company, often seen as a proxy for the health of the economy, is expected to have earned 52 cents per share versus $1.45 a year ago.

Thursday: The weekly jobless claims report from the Labor Department is due before the start of trading. The number of Americans filing new claims for unemployment is expected to have risen to 610,000 from 601,000 in the previous week.

The May index of leading economic indicators is due shortly after the start of trading. LEI, from the Conference Board, is expected to have risen 0.9% after rising 1% in the previous month.

Treasury Secretary Timothy Geithner testifies before the House Financial Services Committee about how the Obama administration plans to restructure the financial regulatory system.

Thursday also brings a General Motors bankruptcy hearing in New York.

Friday: State-by-State unemployment reports are due in the morning.

The Dow Jones industrial average (INDU) lost 30 points, or 0.3%, an hour into the session, after ending the previous session at a five-month high.

The S&P 500 (SPX) index slipped more than six points, or 0.7%, after ending the previous session at a seven-month high.

The Nasdaq composite (COMP) fell 26 points, or 1.4%, after ending the previous session at an eight-month high.

Stocks ended higher Thursday after the day's economic news fueled bets that the recession is waning. However, most of the advance lost steam in the last hour of trading.

Markets have rallied for three months straight, since bottoming March 9. In that time, the Dow has gained 34%, the S&P 500 40% and the Nasdaq 47%, as of Thursday's close.

But stocks have struggled this week as rising Treasury yields and higher commodity prices have fueled worries that inflation could choke off any early signs of recovery.

On Friday, the benchmark 10-year note yield fell to 3.85%, down from 4% early Thursday morning. The yield touched 4% during Wednesday's session for the first time since last October.

Economy: Consumer sentiment was little changed in early June, falling just shy of forecasts. The University of Michigan's consumer sentiment index rose to 69 from 68.7, versus forecasts for a rise to 69.5.

Import prices jumped 1.3% in May, in line with forecasts. It was the largest monthly increase since last July, according to a Labor Department report released Friday morning. The increase was due largely to a jump in petroleum prices. Prices rose 1.1% in April.

Year-over-year import prices fell 17.6%, suggesting that inflation fears are not yet being realized.

Export prices rose 0.6% in May versus forecasts for a gain of 0.4%. Prices rose 0.4% in April.

Companies: BlackRock (BLK, Fortune 500) is buying BGI, the investment unit of British bank Barclays (BCS), in a $13.5 billion cash-and-stock-deal that will create the world's largest money manager.

Other markets: In global trading, most Asian markets ended higher. European markets fell in afternoon trading.

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

U.S. light crude oil for July delivery fell 82 cents to $71.86 a barrel on the New York Mercantile Exchange.

COMEX gold for August delivery fell $21.30 to $940.70 an ounce. 

NEW YORK (CNNMoney.com) -- Stocks ended modestly higher Thursday, with all three major gauges closing at multi-month highs after the day's economic reports fed hopes that a recovery is brewing.

The Dow Jones industrial average (INDU) gained nearly 32 points, or 0.4%. Despite falling short of its 2008 finish, the index ended at its highest level since Jan. 6.

The S&P 500 (SPX) index added over 5 points, or 0.6% and closed at its highest point since Nov. 5.

The Nasdaq composite (COMP) climbed 9 points, or 0.5% and closed at the highest point since Oct. 6.

Stocks have been on the rise since bottoming March 9, with the Dow up 34%, the S&P 500 up 40% and the Nasdaq up 47%, as of Thursday's close.

But stocks have seesawed this week after rising Treasury yields and higher commodity prices sparked worries about inflation hampering a burgeoning recovery.

Thursday restarted the advance, as a rise in retail sales and a bigger-than-expected dip in jobless claims raised hopes that the pace of the recession is slowing. But the early advance lost momentum; the S&P 500 failed to hold on after briefly hitting a key level that traders and other market pros watch.

Nonetheless, the trend remains upward.

"The market keeps chugging along and it's pretty impressive," said Michael Church, president at Addison Capital. "None of the economic data screams outright recovery, but the market tends to move first."

He said that the runup has been liquidity driven, with investors not wanting to miss the boat, even after three months of gains. However, the pace of the advance has been slowing lately and that's bound to continue.

He said that the immediate concern over the next few weeks is the rise in interest rates.

On Friday, May import and export prices are due from the Labor Department. Also, the University of Michigan releases its June consumer sentiment index.

Bonds: A comparatively strong 30-year bond auction Thursday helped temper worries about pricing pressures, at least in the short term.

Treasury prices jumped, lowering the corresponding yields. The benchmark 10-year note yield fell to 3.85%, down from 4% early Thursday morning. The yield touched 4% during Wednesday's session for the first time since last October.

Economy: Retail sales climbed 0.5% in May, the Commerce Department reported. The report was in line with forecasts and showed an improvement from April, when sales fell a revised 0.2%.

Sales excluding autos rose a bigger-than-expected 0.5%. Economists surveyed by Briefing.com thought sales without volatile autos would rise 0.2% after falling a revised 0.2% in April.

But the report mostly reflects the recent rise in gas prices, rather than any new direction for the consumer, said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc.

"Basically the consumer is still dead in the water," he said. "We're not going to see a rise in consumer spending in the second quarter like we did in the first. Household balance sheets are a disaster."

A Federal Reserve report showed Americans saw $1.3 trillion in wealth disappear in the first quarter of this year, as home values declined and the stock market tanked. But the rate of decline was slower than last year. In the fourth quarter alone, $5.1 trillion in wealth disappeared, the biggest quarterly plunge since the Fed started tracking data in 1951.

Another report showed that foreclosure filings fell 6% in May from April, but still saw the third-worst month on record. The report showed that one of every 398 households received some kind of filing in the month, including notices of default, scheduled auctions or bank repossession.

The number of Americans filing new claims for unemployment fell 24,000 to 601,000 last week, according to a Labor Department report released Thursday morning. Economists though claims would dip to 615,000.

However, continuing claims, the number of Americans who have been receiving benefits for a week or more, rose to 6,816,000 from a revised 6,757,000 in the previous week.

BofA: Bank of America (BAC, Fortune 500) CEO Ken Lewis stressed Thursday that pressure from the government played a key role in the company's decision to complete its purchase of Merrill Lynch last year.

Lewis said the federal government threatened to remove management or board members if the company went back on its promise to buy Merrill, even though Merrill's financial state was deteriorating.

Other markets: In global trading, Asian markets ended mixed and European bourses ended higher.

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

U.S. light crude oil for July delivery rose $1.35 to settle at $72.68 a barrel on the New York Mercantile Exchange, the highest close since October.

COMEX gold for August delivery rose $7.30 to settle at $962 an ounce.

Market breadth was positive and volume on the New York Stock Exchange was light for the fourth session in a row. On the New York Stock Exchange, winners beat losers three to two on volume of 1.22 billion shares. On the Nasdaq, advancers topped decliners nine to five on volume of 2.49 billion shares.

The Dow Jones industrial average rose 77 points, or 0.9%, the S&P 500 gained 8 points, or 0.8%, and the Nasdaq composite rose 15 points, or 0.9%.

"We're getting some good numbers here," said Anthony Conroy, head trader at BNY ConvergEx Group, referring to government reports on retail and job market activity.

Conroy said the positive data was fueling the perception that this is "not a bull market rally," but a more substantial rally, based on stronger fundamentals. He said that the stock surge was being fueled by traders who had sat on the sidelines during earlier rallies, and were now trying to make up for what they had missed.

U.S. stocks fell slightly Wednesday as Treasury yields and crude prices climbed, igniting inflation worries.

Retail: The government reported that retail sales rose 0.5% in May, as expected in a consensus forecast from Briefing.com, after falling a revised 0.2% the prior month.

Jobs: Initial jobless claims fell 24,000 to 601,000 in the week ending June 6, the government said.

Claims were expected to have slipped slightly to 615,000, according to the Briefing.com consensus forecast.

Banks: Bank of America (BAC, Fortune 500) CEO Ken Lewis was testifying before lawmakers about the government's role in ensuring that the bank complete its controversial merger with Merrill Lynch.

New e-mails added more insight into the heated talks and indicate the Federal Reserve strong-armed BofA into completing the deal last year.

Bonds and oil: The benchmark 10-year Treasury yield was up to 3.97% from 3.95% late Wednesday. The yield reached 4% during Wednesday trading for the first time since last fall.

Crude prices topped $72 a barrel after the International Energy Agency raised its 2009 outlook for oil demand.

World markets: In Asia, stocks mostly finished higher, although Japan's Nikkei ticked lower. European shares edged higher in midday trading.

Currency: The dollar fell versus the major international currencies, including the euro, the yen and the British pound. 

A spike in the 10-year note yield to a 7-month high dragged on stocks.

The Dow Jones industrial average (INDU) gained 18 points, or 0.2%, nearly an hour into the session. The S&P 500 (SPX) index was little changed. The Nasdaq composite (COMP) lost 11 points, or 0.6%.

U.S. light crude oil prices climbed as high as $71.65 a barrel, rising along with the price of oil, gold and other commodities. Commodity prices have been rallying lately, due to the weak dollar and bets that the economic recovery will drive demand for so-called hard assets.

The rise in commodity prices gave a boost to the underlying stocks, such as Dow components Exxon Mobil (XOM, Fortune 500) and Chevron (CVX, Fortune 500). But weakness in technology shares dragged on the market. Transportation stocks - sensitive to higher fuel costs - slumped as well.

Tech shares rallied Tuesday after Texas Instruments (TXN, Fortune 500) lifted its quarterly profit outlook. But the broader market was little changed even after a positive Treasury auction cooled worries about rising borrowing costs. Additional auctions are scheduled for Wednesday and Thursday.

Concerns that rising borrowing costs could derail a tentative economic recovery have dragged on sentiment over the last few sessions. On Wednesday, the ten-year note yield again surged to a 7-month high.

Chrysler: Italian automaker Fiat has closed a deal to buy the good assets of the bankrupt automaker, after the Supreme Court cleared the way for the deal late Tuesday.

Fiat will take a 20% stake in the company to start with, but that holding can increase to 35% if the company reaches certain goals. The new company -- called the Chrysler Group -- will be majority owned by the United Auto Workers union. The U.S. and Canadian governments will also own small stakes.

Chrysler is expected to start operating immediately.

Banks: On Tuesday, the government said 10 of the biggest banks were well-enough capitalized to pay back a collective $68 billion in loans received last fall at the height of the financial crisis.

The list included American Express (AXP, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Goldman Sachs (GS, Fortune 500).

The Obama administration has dropped its plan to put a limit on salaries at firms that have taken bailout money, according to reports Wednesday. A compromise is expected to be announced later in the day.

Retail: Home improvement retailer Home Depot (HD, Fortune 500) said it now expects full-year earnings in a range of flat to down 7%, versus its earlier guidance for a decline of 7%. Shares gained 1%.

Economy: The government announced that the trade balance showed a deficit of $29.2 billion in April, just slightly more than the forecast from Briefing.com consensus of economist opinion. The deficit was influenced by higher oil prices.

World markets: In Asia, stocks rose. European shares rallied in afternoon trading.

Currency: The dollar rose versus the yen and the euro. 

At 9:05 a.m. ET, Dow Jones industrial average, S&P 500 and Nasdaq 100 futures were higher, recovering from earlier lows.

Futures measure current index values against perceived future performance and offer an indication of how markets may open when trading begins in New York.

Art Hogan, chief market strategist at Jefferies & Co., said the potential rally is based on expectations for inflation in such "hard assets" as oil, which is now selling for more than $71 a barrel, as well as coal, steel, copper and natural gas.

Hogan said that inflation is "going to be a net positive for stocks with hard assets."

Chrysler-Fiat: The Supreme Court decided Tuesday to not hear an appeal from a group of Indiana pension funds aimed at blocking the deal that allows Chrysler to emerge from bankruptcy.

The decision clears the way for Chrysler to sell most of its assets to Italian carmaker Fiat.

Banks: The Obama administration dropped its plan to cap salaries at bailout recipient companies, and is expected to announce a compromise Wednesday, the Wall Street Journal reported.

Retail: Home Depot (HD, Fortune 500), the biggest home improvement retailer in the world, raised its earnings forecast to a range of flat to down 7%, compared to the prior guidance of a 7% decline. On an adjusted basis, the retailer now expects a decline of 20% to 26% in earnings per share from continuing operations, compared to the prior forecast of a 26% decline.

Economy: Readings on the trade balance, Treasury budget and the Fed's Beige Book of economic conditions, are on tap.

The government announced that the trade balance showed a deficit of $29.2 billion in April, just slightly more than the forecast from Briefing.com consensus of economist opinion. The deficit was influenced by higher oil prices.

Oil: Shares of oil firms are likely to be on the move amid the surge in oil prices. Crude prices climbed above $71 a barrel.

At 10:30 a.m. ET, the U.S. Energy Department is due to release its weekly report on fuel supplies.

World markets: In Asia, stocks rose. European shares rallied in midday trading.

Currency: The dollar rose versus the yen, but slipped against the euro and the British pound.