By Ryan Vlastelica
NEW YORK (Reuters) - The U.S. stock market has struggled for direction of late, but next week's payroll report could confirm whether the recent weakness in data and stock prices is waning as the weather warms, or the start of a longer-term trend.
Over the past two weeks, the Standard & Poor's 500 index (SPX) has moved an average of 17.79 points daily, wider than the 12.43 point range in early March. The swings have amplified on mixed economic signals.
While first-quarter earnings have topped expectations, revenue has fallen, with the biggest drops in the energy sector. U.S. data, including on economic growth, have been weak, but are seen as making the Federal Reserve less likely to raise interest rates soon, a view that has lifted market sentiment.
"There are a lot of offsetting trends in the market, which is causing a lot of choppy volatility," said Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston.
"I don't see anything on the horizon that will get people to buy stocks in droves, including the payroll report."
The S&P 500 is about 1 percent away from the record close hit last Friday, when the Nasdaq composite index (IXIC) also hit a record - its first since 2000. At these lofty levels, markets are vulnerable to a sell-off.
In a rare week in which both stocks and bonds weakened, traders may reconsider whether global yields will fall much further, given that the two-year German yield has been running below zero since last August. As yields rose in Europe this week, U.S. benchmark rates followed suit.
Investors have been willing to leave the safe haven of bonds for bigger returns in stocks. But this week's bond market selloff has boosted yields, part of the reason some of the week's biggest losers include utilities and consumer staples companies that pay higher dividends.
Some movement in Greece debt talks and less worrisome regional inflation data this week caused traders to reduce bets the European Central Bank might need to inject more stimulus. This led to the dumping of German Bunds, U.S. Treasuries and British Gilts.
"It appears there's finally a revaluation going on," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago. "Equities are expensive relative to their history; the only market that makes them appear cheap is bonds."
Relative to junk bonds, the earnings yield on the S&P 500 - the inverse of the P/E ratio, which is used for valuation comparisons with bonds - is around 5.8 percent, data showed.
That is below the yield to maturity on junk bonds, of around 6.45 percent, indicating that stocks have a worse value than the riskiest corporate bonds.
About 213,000 jobs are seen having been added in April, after an add of 126,000 in March. That was the weakest reading since December 2013, hurt by both weak crude oil prices and a strong U.S. dollar.