Eyes on jobs, Greece and Goldman
April's jobs report and a slew of other economic indicators may bolster U.S. stocks this week, but jitters over Greece's debt and investigations into Goldman Sachs will test the market's resiliency.
Stocks could also get a lift as earnings season rolls along with investors expecting more strong results. Though some big names are already out of the way, three Dow components -- Kraft , Cisco and Pfizer -- are on tap.
Key economic reports on the manufacturing, housing and services sectors will be released throughout the week, but the main event will be Friday's nonfarm payrolls report for April. The data is expected to show the economy added jobs for a second month in a row.
But probes into Goldman Sachs , efforts to alleviate Greece's debt crisis, a massive oil spill in the Gulf of Mexico and a defused car bomb in New York's Times Square over the weekend could steal the spotlight and test investors.
It could be a wild one. I think we're going to have added volatility, said Joe Benanti, managing director at Rosenblatt Securities in New York.
Seeing the S&P swing around a bit gets some of the deadwood off the sidelines and you start to figure out what the real basis of this market is... I think a slow steady gain is still in the cards.
After hitting a new 19-month high at the end of last week, the market has struggled to gain more ground. The S&P 500 lost 2.5 percent last week, due largely to a drop of more than 2 percent after Greece's credit rating was downgraded to junk status.
But the dip is small, compared with the S&P 500's climb of 75.4 percent from its 12 1/2-year closing low in March 2009.
GREECE, AGAIN
Markets could take a mixed view of an agreement on Sunday by European finance ministers for a record 110 billion euro ($147 billion) bailout for debt-stricken Greece after Athens committed itself to years of painful austerity.
The EU's political commitment and the promise of a forthcoming release of funds will stabilize the Greek situation, said Lena Komileva, head of G7 market economics at Tullett Prebon.
But Michael Cheah, a senior portfolio manager with SunAmerica Asset Management in Jersey City, New Jersey, pointed out on Sunday that even though the plan helps Greece pay its debts now, everyone knows the main problem in Greece is the shrinking tax base.
It also remains to be seen whether the aid will prevent the Greek crisis from spreading to other euro-zone nations, such as Spain and Portugal.
Worries about potential criminal charges for Goldman Sachs will dog Wall Street after news that federal prosecutors in New York have begun investigating the company.
The reported criminal investigation follows civil fraud charges filed about two weeks ago by the U.S. Securities and Exchange Commission and has the potential to up the ante in favor of financial reform. Senate debate on the reform bill began on Thursday and is expected to continue for the next two weeks or more, followed by a vote next month.
The Goldman Sachs news is one of great interest to investors because it reflects on the level of risk that must be put into the market and the financial stocks, said Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, New Jersey.
Goldman has lost more than $20 billion of its market value since the SEC charges were filed.
On top of all those risk factors, investors will closely track an investigation into who attempted to set off a car bomb in Times Square on Saturday evening.
While viewed as an attempted terrorist attack, police on Sunday said there is no evidence to support a Taliban claim of responsibility.
PAYROLLS ON DECK
A week of top-tier economic data could provide further evidence the economy is stabilizing. The nonfarm payrolls report for April, due on Friday, is expected to show the economy added 200,000 jobs -- up from 162,000 in March, according to economists polled by Reuters. The increase in March was only the third since the economy fell into recession in late 2007.
The U.S. unemployment rate, however, is forecast to hold steady in April at 9.7 percent, matching its level in March.
On Monday, the Institute for Supply Management manufacturing index is expected to rise to 60 in April from 59.6 the month before. Monday's economic agenda includes March data for personal income and spending.
March pending home sales, due on Tuesday, are expected to rise 4 percent, compared with a gain of 8.2 percent in February. March factory orders, also out on Tuesday, are seen down 0.1 percent after February's 0.6 percent gain.
The ISM's services-sector index, due on Wednesday, is forecast to rise to 56 in April from 55.4 in March.
BEWARE OF OIL SLICK
Shares of companies connected to the sunken Deepwater Horizon drilling rig in the Gulf of Mexico could see more pressure this week as oil continued to flow unchecked from the undersea well off Louisiana.
Halliburton Co lost 12.3 percent this week, while the U.S.-listed shares of Transocean Ltd sank 19.4 percent.
The oil spill, unfortunately, is not quantifiable at this moment, and any uncertainty will make investors worry, Morganlander said.
Even so, investors have taken solace in the strong earnings season, helping the S&P 500 end April on the upswing -- its third monthly gain in a row. With 337 of the companies in the S&P 500 having reported results, 78 percent have beat analysts' expectations, according to Thomson Reuters data.
When all is said and done, in spite of all the negatives, the market has thus far been quite resilient, said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.
(Reporting by Leah Schnurr; Additional reporting by Rodrigo Campos, Al Yoon in New York, and Nigel Stephenson in London; Editing by Chris Sanders and Jan Paschal)
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