Market Insider

Published: Friday, 1 May 2009 | 7:56 PM ET

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Stocks are likely to encounter headwinds as the market tries to keep pushing higher in the week ahead.

Oliver Quillia for CNBC.com A New York Stock Exchange trader.

The S&P 500 has gained in seven of the past eight weeks, and is positioned to keep rising after closing above a key resistance level Friday. The S&P finished the week up 1.3 percent, at 877, a level not seen since Jan. 9.

Yet, traders say there are a number of risks in the coming week, the biggest of which will be the results of the government's stress tests on 19 banks, now expected to be released Thursday. There are also a number of economic reports, some major earnings, and testimony from Fed Chairman Ben Bernanke before the Joint Economic Committee Tuesday.

A real wild card for the markets is the swine flu outbreak, which has so far been ignored but could become a factor if it is seen as a more deadly threat in the U.S.

Berkshire Hathaway

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[BRK  Loading...      ()   ] held its annual meeting Saturday and that could be a catalyst for stocks Monday. CEO Warren Buffett said Berkshire's first-quarter earnings would likely be down about 11 percent. He also said he'd love to buy a U.S. bank if he could, and that he'd apply his own "stress test." (See complete coverage of the meeting.)

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At the top of the list for markets though are those stress tests of the biggest banks that took funds under the government's Troubled Asset Relief Program. The results for each of the institutions were expected Monday but the release was moved to Thursday. Several banks are expected to need capital but it is not clear how that information will be reported and what solutions for capital raising will be included with the reports.

"They postponed the stress test again so people are saying they want to tiptoe into next week," said Art Cashin, director of floor operations for UBS. "The floor has always thought the stress test was a no-win situation...from the minute it was conceived it was thought to be a a not so hot idea. They're just worried about the presentation now."

David Kotok of Cumberland Advisers said it's important the tests are seen as credible. "If some pass and some fail, the market will adjust the prices between the two groups," he said.

Steven Stanley, chief U.S. economist at RBS, said it appears the government's negotiations with the banks are what stalled the release of the tests. "I think the government just assumed the banks would take whatever results were presented to them, and the banks are complaining they did it wrong. As far as big events next week, that's clearly one and the other one is the payroll number on Friday," he said.

Stanley said he expects that April employment report to show unemployment has climbed to 8.8 percent. As for the pace of job loss, "we do expect to see some improvement.. a decline of 535,000 (non farm payrolls). It's gargantuan but an improvement relative to March. Our sense is, as with other indicators, that things are still pretty bad but they are starting to decelerate," he said.

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"We're now starting to see evidence that suggests that things, at a minimum, are getting worse at a slower pace but perhaps stabilizing in certain areas," said Stanley. He said he will also be watching chain stores' April sales Thursday, which will provide a good look at the consumer.

Another big market event will be the Treasury's issuance of more than $70 billion in 3-year, 10-year and 30-year notes in three days of auctions. The yield curve steepened in the past week as the long end came under pressure on supply concerns. The yield on the 10-year rose to 3.174 percent, its highest level since Nov. 24.

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