The US stock market's stair-step pattern continues. Anyone who bought shares on Wall Street three months ago has seen his (or her) investment go precisely nowhere. Or, to be more accurate, its value has bounced around in a relatively narrow range before falling back over the past two weeks to where it started.

The bull market of the 1990s has been characterised by such periods. The market's big advances have come in short, powerful bursts.

Between those rallies, shares have tended to be volatile as investors have cast around for evidence that would support the next strong run-up in prices.

The rebound in prices since last year's international financial crisis has followed this pattern.

Two bursts of buying - last autumn, and then again in March and April this year - have left the Dow Jones Industrial Average 40 per cent higher and the Nasdaq market with a gain of 80 per cent. But the next month looks like being an uncertain one for equity investors.

The mood has been summed up neatly by July's share price movements. It was on the last day of June that the Federal Reserve raised interest rates, putting an end to the nagging fears that the US economy was overheating.

Such a move normally would hurt share prices. Historically, such rate rises have seldom been isolated events; instead, they have tended to mark the first in a series of increases as the authorities struggled to contain the risk of inflation.

The June 30th move was seen differently, though. While raising rates, the Fed sent a clear message that it did not expect to have to act again.

Over the next two weeks shares traded on the Nasdaq market - many of them technology companies - rose 9 per cent, lifting the market to a record. The Dow also hit a record, although with a more modest 4 per cent gain.

It turned out to be too early to shake off the interest rate blues, however. Fed chairman Alan Greenspan popped up before Congress in mid-July to warn he was continuing to keep a close eye on whether the US economic boom had got out of hand, and would not hesitate to pull the interest rate trigger again if he had to. Shares promptly headed south again, wiping out all of the early July gains.

Potential evidence of an overheating economy was on display last week, further deflating the stock market's optimism.

According to a report last Thursday, the costs of hiring US workers rose faster this spring than at any time in the past eight years.

This hints at an investor's worst nightmare. The hope for US stock prices, which have reached a heady level, rests on the belief that US companies can keep raising their productivity levels at an impressive rate.

If labour costs get out of hand, that will be difficult. Moreover, higher labour costs threaten to feed through into higher consumer prices - a risk that might prompt the Fed to raise interest rates again, damaging stock prices.

These thoughts are likely to hang over the stock market for much of August. The Fed is due to consider interest rates again on August 24th, and every piece of economic data before then will be scrutinised carefully. This week that means the employment report for July, due out today.

At present, only about a third of Wall Street economists expect rates to go up again in three weeks.

If the report suggests companies are hiring at an unsustainable rate, or that earnings are rising faster, more will join that camp.

To complicate matters, US stock market investors may soon have a new phenomenon to contend with: a global economic recovery.

A rebound in Asia and Europe might sound like unalloyed good news - indeed, it has helped the earnings of the US's big multinational companies already. Paradoxically, though, the slump in the rest of the world has been broadly positive for US share prices.

For more clues as to whether US share prices can continue their stair-step rise, it will pay to keep a close eye on the dollar in the coming weeks.