"We're telling people this is a decent time to invest in the markets," said Tobias Levkovich, chief U.S. equities strategist at Citigroup. He said earnings estimates have gotten more realistic and volatility has come down, and he is feeling relatively constructive about the stock market despite the challenging economy.
"Challenged economic times doesn't mean you can't make money in stocks. We think it's a little late to play defense. You have to take a little bit more of an offensive edge to your portfolio," he said. Levkovich said some sectors he likes to dip into now are retailing, semiconductors and insurance.
Traders had been expecting a retest of the market's November lows, but were surprised instead by a willingness by investors to put money back to work in some of the less defensive, down trodden sectors in the past week. Technology finished the week up 9.7 percent, and the commodities-driven materials sector, rose 7.4 percent. Financials were up nearly 6 percent. Defensive consumer staples were the worst performers, up just 1.7 percent.
In the week ahead, in addition to the Treasury announcement, markets will be focused on testimony by Geithner and Fed Chairman Ben Bernanke before separate Congressional committees Tuesday. On Wednesday, eight bank CEOs appear before the House Finance Committee to discuss accountability for the TARP, Troubled Asset Relief Program. There is also a massive $67 billion Treasury refunding in the coming week, and some key economic data, including retail sales for January.
For the Investor:
By the end of the week, the G-7 meets in Rome where finance ministers will discuss the global economic crisis.
"When the G-7 meets, they're going to talk about currencies, but they always do," said Marc Chandler, chief currency strategist at Brown Brothers Harriman. "It seems quite clear they're not going to intervene...It will be Geithner's first time there as Treasury Secretary so it's more of a 'get to know you' than a look over of international proposals."
The dollar fell 0.9 percent against the euro in the past week, snapping a five-week winning streak. The dollar rose 2.4 percent against the yen. The 10-year Treasury fell on the week to 106-16/32, raising its yield to 2.980 percent. The two-year yield rose to 0.987 percent.
The Treasury's auctions for three-year, 10-year and 30-year notes fall Tuesday through Thursday. "The question is how are the auctions going to go?" said Deutsche Bank chief economist Joseph Lavorgna. "I'm not saying we're going to have a failed auction but supply is becoming an issue for the market. You're getting all this supply coming. We're going to get like $2 trillion supply between now and the end of the year...I think the market is going to test the Fed."