WALL STREET WEEK AHEAD
EUROPE will again be at the centre of investors’ focus this week as the US earnings season passes the halfway mark and there is little on the economic calendar to give the market direction.
Economic data expected this week includes weekly initial jobless claims, the Thomson Reuters/University of Michigan’s consumer sentiment index and international trade figures.
Improving data helped push the S&P 500 index up nearly 7 per cent for the year, highlighted by Friday’s stronger-than-expected jobs report.
“It’s the old ping-pong game. Today it is the US, tomorrow it is Europe again,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
“Normally in this type of tape when there is no economic news, it seems like the bias goes to the upside.”
But whether European bond yields spike or other news from Europe emerges will be the wild card for the markets, Saluzzi said.
Greece remains at the forefront of the Eurozone crisis as the government struggles for agreement on fiscal reforms that would be accepted by political leaders and private bondholders as it tries to avoid a disorderly default.
Talks on a bond swap and €130bn in bailout funds have been continuing for weeks before a March deadline when €14.5bn of bonds become due. Hopes that a deal was on the horizon dissipated on Friday as Eurozone finance ministers delayed a meeting scheduled for today.
“There is always the chance in brinkmanship – which is what is being played here – that you have a dangerous outcome if the pieces don’t come together,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
“They have until 19 March. They are going to keep pushing this thing until everybody gets the best deal they can out of it or they decide not to move forward and let Greece go. It’s always a possibility at the end of the game.”
The flood of earnings reports will slow this week. Some 66 S&P 500 companies are expected to report, including Walt Disney, Coca-Cola and Cisco Systems.
NYSE Euronext is also due to report results after the exchange terminated merger plans with Deutsche Boerse on Thursday.
Through to Friday, 283 companies in the S&P 500 have reported results, with 60 per cent posting earnings that have topped Wall Street expectations, a lower percentage than seen in recent quarters through this stage of the reporting season.