U.S. jobs data and developments in the Greek financial crisis could be important catalysts for stocks in the week ahead.
Stocks finished February with a more than 2.5 percent gain, the best monthly performance for the market since November. But the major indices were slightly lower in the past week, after some disappointing economic news resulted in several days of choppy trading and raised worries about a double dip recession.
"I do think this is a pause, not a relapse, when it comes to upward momentum," said Joseph Quinlan, chief market strategist at U.S. Trust Bank of America Wealth Management.
"I don't see how we have a double dip when we had a peak in unemployment. We have loose monetary policy. The only way I can see us getting a double dip is if we close the borders. We haven't had an outbreak of protectionism. I don't think we're going to get it," he said.
Ahead of Friday's February employment report, there is a steady stream of economic reports, including manufacturing data, auto sales, monthly chain stores' sales and the Fed's beige book report on the economy. Greece is also expected to float a 10-year bond mid week, in an effort to generate cash, a deal that is being closely monitored in financial markets worldwide.
There are also a number of Fed speakers on the circuit, and a few earnings, including Costco and Anheuser-Busch Inbev. Warren Buffett this weekend releases his widely-followed annual investor letter as well as Berkshire Hathaway earnings. Buffett will also appear as a guest on "Squawk Box" Monday, where he will answer viewers' questions.
The Dow ended the week at 10,325, down 0.7 percent, while the S&P 500 down 0.4 percent at 1104. Financials were the best performer of the week, up 1.5 percent, followed by consumer discretion
Patrick Kernan, who trades S&P options at the CBOE, said he does not see a directional bias for stocks right now, based on the way options are pricing. "I think the biggest driver is a lack of inertia. People are really waiting to see if there's some driver out there. A lot of people were really spooked by Greece," he said.
Econorama
Economists expect the next round of U.S. data to have some hiccups, as the impact of major snow storms along the east coast shows up in the numbers. In the past week, jobless claims, housing data and consumer confidence all were weaker than expected due to the impact of snow bound workers and consumers.
"You're going to get a whole bunch of jumbled data. Whereas, the employment number is the one you can usually rely on for setting the stage, I think it's going to be more than a normal amount of confusion," said Robert Sinche, chief strategist at Lily Pond Capital Management.
"I think it's going to be very tough to get a lot of conclusive evidence next week. It's going to be a tough week," he said. In addition to the U.S. data, there are several rate meetings, including the Bank of Australia Tuesday and the European Central Bank and Bank of England Thursday.
The ECB is not expected to raise rates, but it will be an important meeting because it is addressing unwinding some of its quantitative easing, he said
ary, up 0.8 percent. The worst performers were materials and utilities, both down 2.4 percent.
Greece's capital raising effort could calm markets if it is successful. He said the market is looking for clarity on the role of the German government, which was reported to be considering guaranteeing the purchase of bonds by state-owned lender KfW. Greece's problems have been troubling to Wall Street, which worries a default by Greece would lead to a domino effect among other weak European economies and create stress on the unity of the euro countries.
"If you look at what the (Greek) prime minister said, they sort of have enough cash around until the middle of March, which is when their next round of proposals are due in terms of their budget adjustments. You certainly wouldn't want to be forced into trying to raise funds into that potential turmoil and excitement," he said."So I think, in the sense of trying to stretch it out and not have the middle of March be a serious time frame, I think it's important."
"I think getting some sort of support from the Germans or others in the EU would also be important in terms of diffusing some of the sensitivity," Sinche said. He said the resolution of the bond sale next week could be positive for the euro, but the currency's longer term trend is lower and it would be a good time to take profits.
The dollar gained 1.8 percent against the euro in the past month and is up 10 percent over the past three months. For the past week, it was barely changed, finishing at a level of $1.3617 per euro.
Quinlan expects the Greek crisis to be resolved by EU members. "It's an important risk to keep in mind, but the way I see it…the resolution will involve the core of Europe, France, Germany…Brussels. They want to ring fence the Greek problem now because if it moves into Spain and Portugal, the costs go up. I don't think we're going to to see sovereign default out of Greece. If anything, you're going to see Europe coming to the defense of a very weak partner," said Quinlan.
