Markets may feel pain from Spain next week
Concern that Spain could default on its debt may negate what should be a decent week for earnings. Companies reporting include Coca-Cola, Citigroup, IBM, Intel, Kimberly-Clark, Microsoft and GE. Also due is the March report on housing starts.
Sooner or later, Europe was going to emerge again as a problem for markets around the world.
This past week was the week, and the coming week's market performance may well depend on how investors view the conditions in Spain and Italy. The big day will be Thursday, when Spain is to auction 2- and 10-year bonds. A bad auction -- producing a high yield or too little demand to sell the entire issue -- could slam markets around the world.
The auction will come as 11 components of the Dow Jones Industrial Average ($INDU) and such heavyweights as Goldman Sachs (GS), Morgan Stanley (MS) Qualcomm (QCOM) and Union Pacific (UNP) will report earnings.
In addition, important reports are due on retail sales and housing. And Thursday's weekly report on initial jobless claims will get close scrutiny after the claims rate bumped up in the latest week.
The bottom line: The week ahead will be busy in the midst of a downturn. Futures trading late Sunday suggests U.S. stock will open lower. The week has the potential to be stomach-churning. And it will come after stocks suffered their worst weekly performance of the year and their second weekly loss in a row. The Dow lost 1.6%, with the Standard & Poor's 500 Index ($INX) down 2% and the Nasdaq Composite Index ($COMPX) fell 2.3%.
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It was a week that saw declines for Apple (AAPL), down 4.5%; Whirlpool (WHR), down 4.8%, General Electric (GE), off 3.3%, and Ford Motor (F) and General Motors (GM), down more than 4% each.
Heathcare stocks were slammed. The Morgan Stanley Healthcare Payors Index ($HMO) fell 7.6% on the week, the worst-performing index among 42 that Market Dispatches tracks.
And the European markets had a bad week. German stocks fell 2.8%. French stocks dropped 3.9%. Spanish stocks fell 4.2% -- and are off some 20% since early February.
Before you rip out your hair, remember: The U.S. rally rally for 2012 is still intact. The Dow is up 5.2% for the year, with the S&P up 9% and the Nasdaq up 15.6%. TheNasdaq-100 Index ($NDX) is up 18.5%. Apple, the heaviest influence on the index and up 12 out of the last 13 weeks, is still up 49% for the year.
But there are head winds that could affect how the markets perform in the week ahead.
Here's what to look for:
Spain is the big worry
Spanish bonds sold off in a big way this week, with their yield ending the week at about 6%. That's a big number for government debt, and it comes because Spain's economy is a mess, beaten up by a housing bubble-and-bust that may be worse than the U.S. housing bubble.
The eurozone's fourth-largest economy is in a major recession, with unemployment above 20%, and the government is struggling to meet demands that it cut spending. How the economy will grow again is another question entirely.
So, its debt is now in the crosshairs of speculators who believe it's worth much less than its face value and are busy making profits with heavy shorting.
The big debt auction on Thursday will tell markets if Spain can survive the immediate crisis or if the eurozone will need to employ some of the $1 trillion bailout fund to keep Spain afloat.
|Markets for the week|
|4/13/2012||4/6/2012||% chg.||YTD chg.|
|U.S. Dollar Index||80.55||80.09||0.58%||0.03%|
Earnings season switches into high gear
This past week marked the start of the first-quarter earnings season. Thirty-two S&P 500 companies have reported earnings already, including Alcoa (AA) and JPMorganChase (JPM). Of these, 75% have beat Street estimates. That's above the long-term average of 62%, according to Thomson Reuters, which tracks the data. Thomson still sees an earnings-growth rate for the quarter of 3.5%. Take out Apple, which is due on May 24, and the growth drops to 2%.
Some 86 components of the S&P 500 are set to report earnings in the coming week. Of these, 11 are Dow components, including Bank of America (BAC), American Express (AXP), Coca-Cola (KO), General Electric (GE), Microsoft (MSFT) and McDonald's (MCD).
The lineup of key reports:
Monday: Citigroup (C), Charles Schwab (SCHW), newspaper publisher Gannett (GCI) and toymaker Mattel (MAT). Citigroup is probably the biggest report. The goal will be to convince investors that its finances are in order and that a dividend increase will really happen. An embarrassing result of the Federal Reserve's stress tests was that the banking giant was forced to shelve plans for a dividend increase.
Tuesday: Coca-Cola, IBM (IBM), Intel (INTC), Johnson & Johnson (JNJ) and Yahoo (YHOO). Coca-Cola and IBM should be the stars of the day. Both have been reporting consistent earnings gains in recent quarters, with IBM's stock price hitting a record high of $210.69 on April 3. Semiconductor maker Intel also has become a darling of Wall Street, also hitting a 52-week high this past week. Johnson & Johnson has been struggling for months with quality control and other problems.
Wednesday: American Express, asset-manager Black Rock (BLK), wireless network developer F5 Networks (FFIV), telecommunications chip maker Qualcomm and tool maker Stanley Black & Decker (SWK). American Express will help gauge consumer confidence by how well people are using its cards. Qualcomm is a supplier to Apple. Stanley Black & Decker will shed some light on the housing and home-renovation markets.
Thursday: Bank of America, Blackstone Group (BX), DuPont (DD), Microsoft, SanDisk (SNDK), Union Pacific (UNP) and Verizon Communications (VZ). (Yes, it's that big of a day, actually bigger.) What investors want to know about Bank of America is how much progress it's made in getting its mortgage business back into shape. Watch SanDisk to see if its client base can survive the iPhone. And Union Pacific's guidance is a way to look at where the economy overall is headed. Microsoft, the publisher of MSN Money, will want to address how the personal computer business is faring against the onslaught of tablets and its expectations of a slew of new products, including Windows 8.
Friday: General Electric, Honeywell (HON), athletic-apparel-makerUnder Armor (UA), Kimberly Clark (KMB), McDonald's (MCD) and oil services giant Schlumberger (SLB).
The economy: retail sales, housing and manufacturing
The perception of the economy has been beaten up in the last week or so because of disappointments in the March jobs report, this past week's jobless-claims report and hints of inflation. The Federal Reserve is divided about whether inflation is going to erupt or not.
This week may clarify things, Europe notwithstanding.
Retail sales for March, due Monday: This should show some improvement from February and from a year ago if only because March was the warmest on record. That's good for builder materials, gardening equipment and Easter sales. Apple's release of its new iPad should also boost the data, according to IHS Global Insight. But a dip in auto sales will be a drag.
Housing starts and building permits, due Tuesday: Yes, starts were lower than expected in February. But permits were up quite a bit, and many analysts see that feeding into starts in March. Plus, both Wells Fargo and JPMorgan Chase cited growing mortgage demand.
National Association of Home Builders Housing Market Index, due Tuesday: This should also show some improvement. Remember, however: Housing starts and building permits are still at near-record lows.
Empire Manufacturing Index and the Philly Fed Index, due Tuesday and Thursday, respectively. These reports from the Federal Reserve Banks of New York and Philadelphia should offer some insight on the strength of the manufacturing rebound.
Initial jobless claims, due Thursday from the Labor Department. The key is if the seasonally adjusted rate stays under 400,000 and preferably below last week's 380,000 rate.
Existing-home sales, due Thursday from the National Association of Realtors. The key is investor buying, now around 30% of total sales. Look for a small gain, and look to see if the inventory is falling. Measured in months' supply, the inventory was at a 6.4-month supply in February.
Index of Leading Economic Indicators, due Thursday from The Conference Board. Look for a small gain, driven by stock prices and small gains in interest rates as the economy looked stronger.
Alias Barry Soetoro,
Obama is not a communist yet. He does not believe in state ownership of all property. Obama is a socialist. He believes in seizing property (through taxation) to redistribute to his campaign supporters and permanent welfare class. He may appear to be communist with his nationalization of AIG, Big Banks, Government Motors and others. He is clearly in the socialist mold of BELEIVING in big government. He favors Public ownership of education, medical care, banks, mortgages, Insurance, and a host of other industries. Dr. Gobbels, a socialist through and through recognized the need for state control over education.
In short, Mr. Obama has not tried to seize all property by force yet. He is a socialist, not communist.
He is out there campaigning against the evil rich , when
a) He's one of them
b) pay less in taxes(%) than his secretary
c) uses charitable donations as a huge write off to pay less taxes
He didn't pay his "fair share' right?
hmmm.... let see... The party that believed in Slavery = Democrat, Jefferson Davis' life long party = Democrat, Founders of the KKK = Democrat, Last KKK Grand Wizard to serve in the Senate (Byrd, WV, Democrat), George Wallace = Democrat, Most segreated city in America = Chicago, a Democrat bastion... Party that believes the way to control races is through government handouts?
Party thast freed the slaves? Republican...
I as not sure I get your point on Racism... Or are you suggesting based upon history that democrats should be voted out if you stand against racism?
And Obama may be from Chicago where thousands of the dead (with Acorn's help) vote every election, but they usually pick LIVING people to vote for, although I would not put it past the Democrats to insist that the dead are a valuable constituancy, and thus need representation.
Get out of personel debt. Be in the market if you want.....but pay off your house, car, credit cards, etc..
It's great peace of mind AND you also, then, who cares what banks do or don't do, you aren't involved anyway.
I see from Mr. Obama's tax returns he doesn't believe in what he preaches. He paid slightly under 21% in taxes, not the 30% he says HE should pay...
Did the Mr. Obama decide, that he is right, and write an extra check to make up the difference? No the hypocrite decided he would only pay what was due, not what he claims to believe is his fair share. Like his hypocrite friend Buffett, who says the same thing, all the while FIGHTING the IRS that claims he OWES far more in back taxes.
Like typical democrats, they want someone else to pay, but when it comes to them, no way...
This is the definition of HYPOCRITE!
Vote Stalin in 2016 !
Vote Lenin in 2020 !
Vote Marx in 2024 !
Vote Mao in 2028 !
Did I leave any commies out?
Well I can understand, not making that loan Doug. Probably has no job lined up. YEars ago, banks would not make a loan if you didn't have 3 years on a job. And the 20% down was the minimum margin required, most required more, of additional collateral to get the loan amount to 80%.
Banks are in the business of being repaid. To much risk in real estate with a banker taking 80% of the bet. Especially in a still falling market. Anoth huge risk is that the Obama Administration keeps pressuring banks to reduce the principle. I.e. take some of the market losses for current borrowers. Imagine if the Stock Market margin lenders would have to 'forgive' principle.
No, the problem is people need to save more for real estate gambles. And don't tell me RE is not gambling. It is worse than car loans...
He's in the socialist stage- I got it
Don't you handouters---------------ever--------------get tired of sounding asinine?
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[BRIEFING.COM] Equities ended on their lows with the S&P 500 down 1.4%.
The S&P entered today's session with a week-to-date gain of 1.5% as investors expected reassuring words from today's Federal Open Market Committee Statement.
Stocks traded with slim losses until this afternoon's FOMC Statement and subsequent comments from Chairman Bernanke sent equities and Treasuries to their lows while also providing a significant boost to the dollar.
Today's Statement was ... More
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