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Mar.13

8:17 PM ET

Friday, 13 Mar 2009

The Week Ahead: Signs of Spring? Or a Muddy Season?

Posted By:Patti Domm

Topics:Banking | Congress | Currencies | Stock Market | Investment Strategy

Sectors:Banks | Oil and Gas

As spring arrives in the coming week, investors will debate whether it's a time to hold out hope for the market or just expect another muddy season where bad economic news leads trading.

New York Stock Exchange (NYSE)
Oliver P. Quilla for CNBC.com
The Fed holds a two-day meeting in the week ahead, and there is a full calendar of economic news including housing, inflation and manufacturing data.

On Monday, it will be one year since the fall of Bear Stearns, which unknown then, had foreshadowed a series of failures among financial institutions and a government rescue operation for the banking industry as a whole.

Over the weekend, G-20 finance ministers meet in Horsham, England ahead of the G-20 summit in April. OPEC, meanwhile, convenes in Vienna Sunday amid talk it will cut production.

This week was stocks' best since November. Many traders though believe it is a temporary bear market rally and will soon fade after a run of as much as 20 percent. But not everyone is gloomy, and some traders believe this at last could be the sign a bottom being formed.

Major U.S. Indexes

	Last	Change	% Change	1 Week % Change	YTD % Change
Dow	7223.98	53.92	0.75%	9.01%	-17.69%
NASDAQ	1431.50	5.40	0.38%	10.64%	-9.23%
S&P 500	756.55	5.81	0.77%	10.71%	-16.24%
Russell 2000	393.09	2.97	0.76%	11.98%	-21.30%
CBOE VIX	42.36	1.18	2.87%	-14.13%	5.90%
FTSE CNBC Global 300	2997.12	42.52	1.44%	8.54%	-16.92%

"I think one has to be very careful about mistaking trading rallies for a bull market, and there's this intense desire to try to call the bottom. Our work says it's a fruitless exercise," said Richard Bernstein, Merrill Lynch chief investment strategist.

Traders say Friday's more subdued advances among stocks may be a sign the market is consolidating its gains, and options expiration in the coming week may be a further positive sign for the markets.

Financial stocks were among the star performers, gaining almost 34 percent on the week, after months of being pummeled by investors fearful that the government's rescue efforts are not working. The markets still await key details from Treasury Secretary Tim Geithner on how the government will deal with toxic debt on banks' books.

"Everybody's scared of missing the turn, so you have everybody piling into these things. (financial stocks)," said Bernstein. "The important thing to remember, and it's inevitable here if you look at the history of bubbles, there has to be massive consolidation in the financial sector. This is not what anybody wants to believe and Washington has stymied it."

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Financials' 34 percent leap marked a one-week record. "From my perspective, what people still refuse to do is go back to basic fundamentals and get away from trading technicals. If you just look at the basic fundamentals of these companies, they are still in deep, deep trouble. It's our least favorite sector," Bernstein said. He does like health care, consumer staples, telecom and utilities. "We're also big bond fans," he said in reference to Treasurys.

As investors have shunned stocks in recent months, it's been a popular trade to seek out the yield and security of corporate bonds. But Bernstein says if you watch the long-term performance of corporate bonds, they have only outperformed Treasurys and stocks about a fifth of the time. "We went back to 1926, and only 20 percent of the time do investment grade bonds outperform both Treasurys and stocks. Sometimes it was in recovery periods, and sometimes it just happened by fluke," he said.

From 'Fast Money':

The Week's Hidden Winner Wasn't a Bank ...

In the coming week, Fed Chairman Ben Bernanke will be in the spotlight. First, he has given an interview to "60 Minutes," which airs Sunday evening. This is an unusual step for a sitting Fed chairman. They usually maintain a low profile as far as media interviews go. Fed watchers believe Bernanke wants to reach and reassure a broader audience than the Fed normally reaches through financial media.

Bernanke also speaks Friday, along with FDIC Chairwoman Sheila Bair at the annual meeting of the Independent Community Bankers of America in Phoenix.

Earnings Central

There are just a few major earnings in the coming week, including Oracle [ORCL Loading... () ] and Nike [NKE Loading... () ] on Wednesday, and FedEx [FDX Loading... () ] and Palm [PALM Loading... () ] on Thursday. Another corporate story investors will be watching is General Electric's [GE Loading... () ] investor meeting Thursday, where GE executives will provide a detailed look at General Electric Capital.