A big week for the economy -- and for markets

Next week will be a huge test for the rally, climaxing with Friday's jobs report. The Federal Reserve holds an important meeting. Earnings are due from MasterCard, News Corp., Pfizer, Apache, Kraft Foods and American International Group.

By Charley Blaine Oct 28, 2011 9:03PM
Charley BlaineUpdated: 2:30 a.m. ET, Monday

If you thought the stock market was home free after the eurozone nations came up with a plan for their debt-and-banking crisis this past week, think again.

The coming week will almost certainly test your optimism. There's the big jobs report due on Friday and a two-day Federal Reserve meeting starting Tuesday. Not to mention another big week of earnings that includes Pfizer (PFE), JDSU Uniphase (JDSU), Time Warner (TWX), Baker Hughes (BHI) and Starbucks (SBUX).

If the markets come out ahead on the week and you want more drama, don't worry. There's plenty more volatility ahead. And we're not just talking about Halloween on Monday.

You had to love the stock market this past week -- unless you're a bond investor or a hard-core bear who believes financial markets are on the verge of collapse.

The major indexes scored solid performances for the week. The Standard & Poor's 500 Index (INX) and the Nasdaq Composite Index ($COMPX) are enjoying their best October performances since 1974. The Dow Jones industrials ($INDU) are looking at their best October ever. Best of all, the major averages are back in the black for the year.

Article continues below.
Bond investors may not have been too happy. Stocks rose four days out of five and pulled money away from  bonds. To compete, yields had to rise and they did. The iShares Barclays 20+ year Treasury Bond exchange-traded fund (TLT) dropped 2.5% on the week and is down 10% since Oct. 3 -- as the big stock market rally erupted.

And short-sellers -- sure that the Dow was headed to 10,000 or worse -- had to cover their positions quickly, especially on Thursday, when the Dow soared as many as 415 points before settling back to a 340-point gain.

Bears may get another opportunity, but they'll need a solid catalyst. Momentum has moved to the bulls. The Dow, S&P 500 and Nasdaq ended the week trading above their simple 200-day, 50-day and 20-day moving averages. That hasn't occurred since April.

One possible catalyst: Japan intervened early Monday to drive the yen lower against the euro and the dollar. A rising yen is a threat to Japanese exports. Futures trading suggested the Dow may open down 100 points on Monday.

The more important catalyst may come on Nov. 23 when the congressional "supercommittee" is supposed to propose more than $1 trillion in cuts to federal spending.

The economic data -- consumer spending, durable-goods sales, auto sales and even new-home sales -- are showing the domestic economy still has some strength. (When the economists finally study this year, they'll point to the big rise in gasoline prices, the Japanese earthquake and the summer's bitter budget battles as catalysts for the summer slowdown.)

Markets for the week



10/28/2011

10/21/2011

% chg.

YTD chg.
Dow Industrials

12,231.11

11,808.79

3.58%

5.65%
S&P 500

1,285.08

1,238.25

3.78%

2.18%
Nasdaq 

2,737.15

2,637.46

3.78%

3.18%
Russell 2000

761.01

712.42

6.82%

-2.89%
Crude oil 

$93.32

$87.40

6.77%

2.12%
(per barrel)











U.S. Dollar Index 

75.22

76.63

-1.84%

-5.14%
10-yr. Treasury

2.31%

2.20%

4.68%

-30.23%
Gold

$1,747.20

1,636.10

6.79%

22.92%

The week ahead has a lot to think about. Europe isn't finished bedeviling investors. So much of the plan announced Thursday needs to be fleshed out.  And maybe the biggest question of all: Can the austerity measures envisioned for Greece, not to mention Italy, Spain, Portugal and Ireland, actually generate new economic growth?

The jobs report is the big economic event
The Labor Department releases its October unemployment and nonfarm payrolls report before the market opens on Friday.

The betting is that unemployment will show little improvement over September's 9.1%. Most analysts see the rate rising to maybe 9.2%, with payrolls rising maybe 95,000 or so. There are a number of economists who don't think the numbers will be that good.

Payrolls rose 103,000 in September, the government's Oct. 7 report estimated. Watch the revisions.

But the Fed is important, too
A deeply divided Federal Open Market Committee meets Tuesday and Wednesday to discuss what -- if anything -- the central bank should do to boost the economy. The answer is probably not much more than what the Fed has said it will do: Sell short-term Treasury securities and buy in longer-term securities to keep long-term rates low.

The FOMC is the Fed's rate-making body. A number of FOMC members are worried that the Fed is creating inflationary pressures. You'll see the divisions in the Fed's statement, due Wednesday morning and then when Chairman Ben Bernanke holds a news conference at 2:15 p.m. ET.

Also important will be this week's meeting of the Thursday and Friday meeting of the Group of 20 nations in Cannes, France. Implementation of the eurozone's rescue plan will be a big topic. As big a topic will be if China agrees to lend money to the European bailout fund and requires the Europeans to pay in yuan.

Also coming up:

Chicago Purchasing Managers Index, due Monday. Widely watched as a gauge of economic confidence because its results track national trends.

Institute for Supply Management Manufacturing Index for October, due Tuesday. This is the third-most-important release of the week and is expected to come in above 50 -- the breakpoint between growth and contraction.

Auto sales. Due Tuesday from automakers. Look for sales to come in at an annualized 13.4 million units, according to Edmunds.com. That would be the best monthly performance since August 2009, when sales were inflated by the government's Cash for Clunkers program.

ADP National Employment Index, due Wednesday from payroll processor ADP. This will offer an early look at what Friday's jobs report shows. The report measures private-sector employment. Most economists expected a gain of maybe 100,000. Nomura Securities is looking for 135,000.

Institute for Supply Management Non-Manufacturing Index for October, due Thursday. Most analysts see this rebounding a bit from September's reading of 53.

Factory orders, due Thursday from the Labor Department. Look for little change.

Another big week for earnings reports
Some 116 members of the S&P 500 Index will be reporting results this week. So far, the third-quarter earnings season has been strong with 71% beating Street estimates, Thomson Reuters says, despite complaints about lack of demand, regulation and other woes.

Energy and materials companies have reported the biggest profit gains. Royal Dutch Shell (RDS.A), Exxon Mobil (XOM) and Chevron (CVX) all reported big gains due to higher prices.

In fact, the earnings are ahead of long-term trends. Where earnings beat Street estimates, it's because companies are seizing opportunities in Asia and elsewhere. Wyndham Hotels (WYN) said nearly all of its growth is coming from Asia.

If a company is dependent on Europe and the United States, results have disappointed, Thomson Reuters said this week. 3M (MMM) specifically cited this issue.

Here are some of the key reports scheduled:

Monday: Allstate (ALL), Anadarko Petroleum (APC), FMC (FMC), Humana (HUM) and Winn-Dixie (WINN).

Tuesday: Archer Daniels Midland (ADM); Baker Hughes (BHI); Boston Beer (SAM), maker of Sam Adams beers; JDSU Uniphase, Pfizer, Martha Stewart Living Omnimedia (MSO).

WednesdayAOL (AOL), CenturyLink (CTL), IntercontinentalExchange(ICE), Kraft Foods (KFT), MasterCard (MA), News Corp. (NWSA), Qualcomm (QCOM), Time Warner, Sony (SNE), Transocean (RIG) and Zipcar (ZIP).

Thursday: American International Group (AIG), Apache (APA), BMW (BAMXF), Cigna (CI), Kellogg (K), Sara Lee (SLE) and Starbucks (SBUX).

Friday: GlaxoSmithKline (GSK) Warner Chilcott (WCRX) and the Washington Post Co. (WPO).
53Comments
Oct 29, 2011 12:26AM
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Nerd ok msn investor blog brothers and sisters, riddle me this:

 

1.  if the gdp is barely off the flat-line after years of stimulus and QEI, QEII, Operation Twist, etc. and was also positive prior to the 2008-2009 crash;

 

2.  if our national debt is now MUCH HIGHER than it was back before the 2008-2009 crash;

 

3.  if this EXACT SAME bounce off of a 20 percent "bear-market" decline back up to the 200-day moving average also took place in early 2008 prior to the 2008-2009 crash;

 

4.  if BOTH the small business and consumer confidence indices are down to ALL-TIME (as in since forever) "NON-RECESSION" LOWS where they were prior to the 2008-2009 crash;

 

5.  if the case-shiller home price index is at the VERY SAME LOW WATER MARK as it was in march of 2009 at the depth of the 2008-2009 crash;

 

6.  if consumers and housing make up 80 PERCENT OF THE ECONOMY;

 

7.  if groups of OCCUPIERS have been forced into the streets suffering bodily harm from the man, and appear willing to gut it out through the winter cold;

 

8.  if unemployment rates ARE WORSE than during the 2008-2009 crash;

 

9.  if global recession concerns in the world's number 1 (eurozone) and 3 (china) nations are higher than before the 2008-2009 crash;

 

10.  if the US Congress appears to be non-performing and dysfunctional likely leading to further credit agency AAA rate reductions as well as very disruptive "forced" spending reductions across the government with still no long-term debt reduction plan in place;  

 

please tell me how all of these talking-head csnbc "experts" and stock traders and investment managers and hedge-fund managers and various and sundry other market "gurus" have the co jones to tell me that the USA is going to somehow avoid a second double-dip recession????

 

is this because they are doing their part to support the economy by buying, snorting, smoking and injecting ultra-vast quantities of HOPEIUM???

 

do tell, do tell ......  I don't know 

 

Oct 29, 2011 11:49AM
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please tell me how all of these talking-head csnbc "experts" and stock traders and investment managers and hedge-fund managers and various and sundry other market "gurus" have the co jones to tell me that the USA is going to somehow avoid a second double-dip recession????
Hot They don't really care about reaching any final conclusion.  They're all about the drama and intrigue of the ups and downs, despair and excitement, losses and profits and soap opera drama.  As long as the VIX keeps moving from 20 to 40 and back again, and the Calls and Puts go up and down, they don't care about medium and short term appreciation and dividend investing.  Hell, you can use the VIX, FAS, SLV and the like to place derivative bets on everything under the sun.  However, averaging, buying low, selling high, reducing exposure and risk with Calls and Puts, dividend timing and tax loss selling still work even in these volatile times, you just have to pay attention and be quicker.
Oct 30, 2011 1:09PM
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HAHAHAHAHAHAHAHAHAAA​AAAAAAAAAAA  SO SO SO SO FUNNNNNNNNNNY

 

ANYWAY WATCHING CBS EVENING NEW'S THEY REPORTED ABOUT CALIFORNIA STUDENT'S.......THE HOME OR BIRTH PLACE OF SOCIALISM/COMMUNISM.........THE STATE SPENDS 9.6 BILLION ON PRISONS WHILE CUTTING EDUCATION TO STUDENTS TO 5.6 BILLION........THE VERY SAME STUDENTS WHO RANT CHANT ABOUT HOW ILLEGAL'S ARE GOOD FOR ALL........4 BILLION ALONE IN EDUCATION COULD DO WHAT OH CUT FEES OF $8OOO/YR DOWN TO LETS SAY $6000...............​..IMAGINE IF THEY STOPPED THE SANCTUARY FOR THESE ILLEGAL'S......NEED A GOP CANDIDATE TO BE ASKED ABOUT STOPPING FEDERAL FUNDS FROM GOING TO THESE STATES!!

 

HOW SCREWED UPPED ARE THESE STUDENTS AND POLITICIANS.......TH​EY ARE WASTING MONEY ON ILLEGAL'S AND CRIMES OF THESE ILLEGAL'S.....THEY WILL MARCH AGAIN THEY WILL DEMAND AGAIN THEY WILL LEAVE THE WAR IN MEXICO UP TO EVERY NON-MEXICAN TO FIGHT AND DIE .....WHY!!

Oct 30, 2011 10:12PM
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Things are bad everywhere. The US is to be downgraded again, no deficit cut is being agreed on and 2012 is an election year. In Europe, wait until Italy and Spain decide that a 50% debt cut would be nice for them too...
Oct 30, 2011 11:36PM
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if you pay attention to what "the market" does in a week's time, you shouldn't be investing. You also probably have an IQ lower than a houseplant's.
Oct 30, 2011 12:31AM
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Active,

 

You aren't the only one that sees an eerie likeness to the 2008/09 market. As you know I come from the Austrian school, so riddle me this.

 

Since the economy, despite the FED, has gotten us barely above the flat line as opposed to the boom we were experiencing in 2006, when we go into the next downturn . How low will we go?

 

With the economy lashed to the lead weight of a nearly 15 trillion dollar debt, will it retain any buoyancy?

 

Since interest rates are already near zero, what course will the FED take?

 

When the Chinese dump their U.S. debt, how many dollars will be repatriated from other countries beside China?

 

How many wheelbarrows of cash will I need for a loaf of bread?

 

 

Oct 30, 2011 6:16PM
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All i´m saying is the 50% reduction in the Greek debt is not a solution that can be xtended to other much bigger countries, such as Italy and Spain. That´s simply because there is no money to back banks that would go under with that measure.
Oct 31, 2011 1:15AM
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Governor Jerry Brown’s proposal to raise the age when most public workers can retire with full benefits to 67, from 55, would put California in the company of just three other states. It would let police officers, firefighters and others with physically demanding jobs retire earlier without benefit cuts.

Embarrassed Umm,  and it would put them in the company of all Social Security recipients. Simple solution folks, put everybody, civil servants, police, teachers, military and all the rest including all politicians in Social Security then all these games will come to a halt. 

Brown’s proposed change would apply only to newly hired workers.

Sick   Oh, that's real fair?

 

Oct 29, 2011 5:38AM
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So, what else is new?  The market needs no issues to act on profit.  What we (the people)need is a system designed to bring some stability to the markets by developing more long-term investments.
Oct 31, 2011 8:45AM
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It's not just paper.  For many people it is their life and their work invested in the market.  And it is of great concern when it is devalued.

Caviler attitudes make it easy for the greedy and unscrupulous to act because they feel that they are not 'hurting anyone'.

If the thought of damaging 'real' people and 'real' lives came into play I think at least a few (yes even some politicians) might think twice prior to their actions.  But unfortunately they only see numbers, votes, money and paper - not the FACES so they continue to screw everything in their path.
Oct 31, 2011 12:54AM
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The market is in for another dip.  Sold all positions on Friday and I am staying in cash until this week is over.  May have to sell short if the market starts turning down and cover within a day or two.  I can never in my life remember the market with swings like we have seen.
Oct 30, 2011 11:45AM
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Let´s face it, the jobs market in the US isn´t going anywhere before lawmakers move to ban imports from countries with lower production costs. Simple as that
Hot Yes, let's face it, all we need is a world wide trade war to solve our lack of competitiveness and the impact of globalization. And how dare the EU help the PIIGS default on 50% of their debt, only the US has the morale right, as the provider of the worlds base currency, to deflate our debt in the hands of others. I mean, unless you get 4% interest on US debt, doubling it's value every 18 years, you're on the losing end of our Ponzi scheme. US debt should be paying 6-8% and where would we be then? In the same boat with the EU and PIIGS. 
Oct 29, 2011 10:29PM
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Hey,,,,,,,Be in on the ride...Or don't....Doesn't mean $hidt to the rest of us, who are investors.  Hot
Oct 29, 2011 5:05PM
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RICH MAN SAYS' Are you serious you going to raise my tax's after all of my "contributions to your cause"FED SAYS' No we are going to raise inflation on the poor #$%$ and act like we are doing them a favor.
Oct 31, 2011 2:46AM
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Politicians only have to work for two years and then retire with full benefits. Now is that right?
Oct 31, 2011 4:02AM
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I am so sick of people blaming, "The Government", when the government is every voter.  You, (we), can change any of it.  ANY OF IT!  NEVER POSE A PROBLEM WITHOUT A SOLUTION!!!!!
Oct 29, 2011 11:58AM
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“Although lots of details still have to be elaborated on and some issues have to be clarified, yesterday’s deal underpins my view that the summit would likely be the place where the odds start to change in the right direction,” he said in a note to investors today. Rogoff remained skeptical and said that the sustainability of the whole euro project is in doubt because of “too many inconsistencies” about a bloc of countries seeking to stay independent while unifying their currency. “It’s pretty darn clear the euro does not work,” he said. “It’s not a stable equilibrium.”
Hot The sky's falling bears are already churning up the next round of FUD. All they need is a little help from the party of shorts and no new taxes and we'll repeat the last 3 months all over again. Here comes tax selling in early Nov for everybody that bought GE early in 2011 at 20 and then bought more in Aug-Sept for 15, then we get the Super ****es NOT passing anything and finally we get a year end Christmas blizzard or Santa Claus rally. Then we have earnings season all over again in January. Gift with a bow Can't wait for all the election primaries.
Oct 30, 2011 10:33AM
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Let´s face it, the jobs market in the US isn´t going anywhere before lawmakers move to ban imports from countries with lower production costs. Simple as that. And the Greek "solution" of defaulting on 50% of its debt is everything but a nice model for Italy and Spain. Italy alone owes $2.6 trillion, it would be happy getting rid of $1.3 trillion, but even the now leveraged European Fund would be wiped out...
Oct 31, 2011 9:49AM
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Wow, the Dow is down on news of the Patriots loss!
Oct 31, 2011 9:29AM
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Q. How many Democrats does it take to screw in a light bulb?
A. Just one, but it really gets screwed.

 

Now What Is 'Politics'?

A little boy goes to his dad and asks, "What is politics?"

Dad says, "Well son, let me try to explain it this way: I'm the breadwinner of the family, so let's call me capitalism. Your Mom, she's the administrator of the money, so we'll call her the Government. We're here to take care of your needs, so we'll call you the people. The nanny, we'll consider her the Working Class. And your baby brother, we'll call him the Future. Now, think about that and see if that makes sense,"

So the little boy goes off to bed thinking about what dad had said.

Later that night, he hears his baby brother crying, so he gets up to check on him. He finds that the baby has severely soiled his diaper. So the little boy goes to his parents' room and finds his mother sound asleep. Not wanting to wake her, he goes to the nanny's room. Finding the door locked, he peeks in the keyhole and sees his father in bed with the nanny. He gives up and goes back to bed. The next morning, the little boy says to his father, "Dad, I think I understand the concept of politics now."

The father says, "Good son, tell me in your own words what you think politics is all about."

The little boy replies, "Well, while Capitalism is screwing the Working Class, the Government is sound asleep, the People are being ignored and the Future is in deep poo."

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