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Market Insider: Recession the Only Thing Roaring in March

Stocks limp into March at 12-year lows, amid signs the market could still be heading south.

In the coming week, a heavy calendar of economic news, including Friday's jobs reports, will pummel a market used to negative surprises. There are few earnings reports with the exception of AIG , which is expected to report a $60 billion loss before Monday's opening bell. The company and regulators are in talks this weekend about options for the government-controlled insurance giant.

Berkshire Hathaway releases earnings and Warren Buffett's closely watched investor letter over the weekend.

On Tuesday, Fed Chairman Ben Bernanke goes before Congress for the third time in a week to discuss the federal budget with the Senate Budget Committee. Treasury Secretary Timothy Geithner, who has been keeping a low profile lately, speaks to a House committee on taxes that afternoon.

"There hasn't been a very good track record of late for either one of them, but I will say Berrnake's ability to give detail on the bank rescue plan helped the market Tuesday, but he didn't help Wednesday," said Jefferies managing director Art Hogan.

"We could get another eye-popping bad number and a tick up in the unemployment rate," he said of Friday's jobs report. Economists expect a 675,000 decline in non-farm payrolls and an unemployment rate of 8 percent.

But Hogan said there are signs chain store sales, reported Thursday, might not be as dire as expected. "Some of our stores checks are showing that some stores are actually putting up better numbers—BJ's , Costco , Kohl's , Wal-Mart . The February checks have actually come out more supportive than we thought," he said. Hogan noted that the pickup in buying is not just in the food category. Auto makers report their monthly sales Tuesday.

Markets Mayhem

The Dow ended February down 11.7 percent at 7,062, giving it a 19.5 percent decline since Jan. 1 and its worst February since 1933. The S&P 500 was down 11 percent for the month, finishing Friday at 735, closing before its November low for the first time. NASDAQ was down 6.7 percent at 1377, its worst February since 2002.

Stocks wilted in the past week as investors worried about the lack of clarity on the banking sector, even with the government's move to raise its stake in Citigroup to near 40 percent. Financial stocks tumbled 7.4 percent Friday but were up nearly 2 percent for the week. The health care sector, a popular safe haven, suffered the most pain with an 11.5 percent decline in the past week after President Obama announced plans to reform health care.

From 'Fast Money':

BlackRock Vice Chairman Bob Doll said the market's behavior is not unexpected in a bottoming process. "We kind of retraced our steps. That's what the bottoming process is about. You build a rally. You give it back. You build a rally. You give it back," he said.

"My message to anybody who will listen is: 'dollar cost average back into sticks,'" he said. "A lot of people with a ton of cash on the sidelines are scared to death...the risk reward is improving is what I'm saying."

Doll said he thinks the market will perform better when there is more clarity about the government's rescue plans for the banking system. "Markets hate uncertainty. We've just had too much of it," he said. "I'd like to see the mark to market rule suspended. That would enable financial institutions begin to come together."

Doll said one area of encouragement would be improving commodities prices. Nymex crude iin the past week gained 11.8 percent to $44.76 per barrel. "It's nice to see oil move from that $35 to $40 range where it's been for a time," he said. Energy is his favorite cyclical group.

"I still t think selective technology stocks, and technology as a whole are doing very well for a recession. I have not changed that view," he said. The S&P technology sector finished the past week down nearly three percent.

LIBOR GOES 'THE WRONG WAY'

Credit Chill

Credit markets again show some signs of frosting up. Libor started inching up, a worrisome sign to Cronus Future Management's Kevin Ferry. "With the Citi deal, Libor forwards went the wrong way," he said, adding that in government hands Citi is the ultimate safe counterparty.

"They're (the government) not just a passenger. They're getting behind the steering wheel and the system doesn't want to play," he said.

More From CNBC.com

Ferry said he had been encouraged by the record levels of corporate debt and Treasury issuance in January and February. "It was in amounts that led me to think we were going to turn the corner. But what we've seen in the last ten days is an inordinate amount of focus on Washington and the Obama Administration, and now it's the mini ice age in the credit markets," he said.

One positive for credit markets is that the Fed will begin its TALF (Term Asset-Backed Securities Loan Facility) program early next week. TALF is a program aimed at consumer lending, such as auto loans and credit card debt.

Dollar Daze

Currency markets will be watching Europe in the coming week. The European Central Bank and the Bank of England meet Thursday, and both are expected to cut rates.

The dollar, in the past week, rose 4.9 percent against the yen to a level of 97.5991, and gained 1 percent against the euro , to a level of $1.2676 per euro.

"I think the yen's going to continue its recent trend of decoupling form the equities market. I'm looking for the dollar to go up to 102/103," said Meg Browne, senior currency strategist at Brown Brothers Harriman.

For Investors:

"I think what's going on in Europe will continue to weigh on the euro. Not just the exposure to Eastern Europe, but the fact they are having trouble competing in a global market where the euro is relatively strong," she said.

For the dollar this week, the U.S. jobs number could be significant. "I think what they'll do is confirm a very weak economy. Q1 is no sign of improvement compared to Q4. It looks like people are looking for 4.5 percent contraction in Q1. I think there's probably some positioning in front of it, but I think ink the real thing driving these markets , what they are focusing on , is how officials are handling it," she said.

"I don't think the impact of a huge budget deficit is a factor in the dollar yet. I think people are still hopeful that these programs have some impact and that's more important than the deficit," she said.

Econorama

Ahead of Friday's jobs report, there is plenty of other data to watch. ISM manufacturing data and construction spending are reported Monday. Personal income is also reported that day. On Tuesday, pending home sales for January are announced. The Fed's beige book on the economy is released Wednesday. ADP employment report and ISM non manufacturing data are also reported Wednesday. Thursday data includes weekly jobless claims, productivity and costs and factory orders. Consumer credit is released Friday.

From 'Mad Money':

Besides Bernanke's testimony Tuesday, Fed Vice Chairman Donald Kohn appears before the Senate Committee on Banking, Housing and Urban Affairs Thursday.

On Monday The National Association for Business Economists holds its Washington Economic Policy conference. Richmond Fed President Jeffrey Lacker speaks there at 12:45 p.m. Atlanta Fed President Dennis Lockhart speaks three times in the coming week. He speaks on the economy Tuesday at 8 a.m., again on the economy Wednesday at noon and Thursday at 12:45 p.m.

Bernanke heads to his home town of Dillon, Sc.C. Saturday where he will attend the Dillon Interchange Dedication at Dillon High School.

Earnings Central

In addition to AIG, Dish Network reports earnings Monday and AutoZone reports Tuesday. B.J.'s Wholesale, Costco and Toll Brothers report Wednesday. On Thursday, Marvell Tech reports and on Friday, Brazil's Petrobras .

On Monday, Genentech meets with investors and is expected to tell them why it doesn't like the takeover offer from its majority shareholder, Roche.

Questions? Comments? marketinsider@cnbc.com

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • CNBC's Senior Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.