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Week Ahead: Watching Washington, Fearing Financials
Stocks will continue to wobble until Washington finds the right prescription to help fix the ailing financial sector.
Traders say economic data in the coming week is important for markets, but the most important headline investors await would be news of a plan from the U.S. Treasury to remove the troubled assets from banks books. There is so far no announcement planned though Treasury Secretary Tim Geithner has promised more details in the next couple of weeks.
The mood on Wall Street is about as gloomy as it gets. Yet, the debate continues to rage on whether stocks are ridiculously cheap or whether the market is just finding another stopping point on its way south.
CNBC.com Slideshows:
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Financial stocks were bashed in the past week, with the S&P financial sector losing 19 percent, compared to the 7 percent decline in the overall stock market. The S&P 500 crumpled, losing 51 points to 683, while the Dow lost 435 to 6626. The Nasdaq slumped 83 points on the week or 6.1 percent, to close at 1293, its biggest decline since the Nov. 21 week when it last set a new low.
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Some key stocks, like General Electric [GE
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], American Express [AXP
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] and Citigroup [C
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] traded in single digits as investors punished financial companies across the board. GE owns CNBC.
"Fundamentally, the market should be higher, but the market will only be higher with confidence and clarity," said Tim Smalls of Execution LLC. "I think the market's going to trade the same way it's been trading. I suspect that over the next two weeks, you're going to start getting some more concrete stuff coming out of Washington."
In the coming week, President Barack Obama will set the stage for new investment in stem cell research when he signs an order reversing restrictions on government funding for embryonic stem cell research. Also, the White House auto team continues its review of General Motors and Chrysler, starting with a visit to the industry's technical centers in Detroit Monday.
For Investors:
On Thursday, the House Financial Services holds a hearing on mark-to-market accounting, blamed by some for sinking the banking sector. An alteration of the rule would have a big upside impact on banking stocks.
Fed Chairman Ben Bernanke speaks Tuesday at the Council of Foreign Relations on financial reform and systemic risk, and Treasury Secretary Tim Geithner testifies before another Congressional committee on the Obama budget Thursday. .
There may also be developments in two big merger sagas. Roche Friday raised its hostile bid to $93 per share, or $45.7 billion, for the 44 percnet of Genentech it does not yet own. Also, Dow Chemical and Rohm and Haas are in talks to to try to settle differences over Dow's $15 billion bid for Rohm and Haas.
There's not an investor to be found who is not rooting for the prosecution of alleged ponzi scamster Bernie Madoff. On Thursday, he may be in court. The prosecution Friday indicated it was working on a plea deal with Madoff.
Econorama
Retail sales, released Thursady, is the big data point economists are watching in the coming week. The NFIB small business survey is issued Tuesday, as is wholesale trade. Weekly jobless claims and business inventories are reported Thursday, and international trade, import prices and consumer sentiment are Friday.
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RBS Greenwich Capital's chief U.S. economist Steven Stanley said retail sales and international trade are two releases he's waiting for in the coming week.
"We've seen less bad numbers on the consumer since the turn of the year. The Christmas season might have been the worst of that," said Steven Stanley, chief U.S. economist at RBS Greenwich Capital. "I think things are still falling, but falling at a slower pace than in the fourth quarter."
"It doesn't look like the consumer is worsening at an accelerating rate. That's a good thing, but everything is worsening," he said. Stanley said the trade numbers should show a big drop off in imports. "We're looking for a narrowing of the trade gap, mainly because we think imports are going to contract more than exports."
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Data is a real-time snapshot *Data is delayed at least 15 minutes
