Weekly US Markets Update and Outlook Stocks will try to avoid wild cards on credit, banks
Lighter week for economy, earnings could still yield some surprises
MarketWatch: The wild card is that a disappointment from some familiar quarters -- housing, financials and the credit markets -- could knock stocks back into the red, investment managers say. "The markets have taken the collective bit in their mouths, embraced the belief that the worst is behind us with the housing situation and that the financial contamination will get better from here," said Jeffrey Saut, chief investment strategist for Raymond James. But Saut, for one, isn't a believer. "I think we're going to get a pullback," he added. The U.S. stock markets, lately rising on investors' newfound willingness to take on risk, will try to cling to their nearly two-month rally during next week's round of economic and corporate news. The trigger to this collapse could come in the form of more big write-downs or losses from banks, signs that the spring home-sales season will fall flat or a new wave of consumer-loan defaults. These could wipe out the recent optimism that the housing-related credit crunch and financial crisis may be over, a sentiment that analysts say has spurred a recent return to stocks. Those concerns, echoed by other investment strategists, haven't yet derailed a market rebound that began the third week of March when the Federal Reserve announced an unprecedented rescue plan to ensure the solvency of Bear Stearns Cos., reassuring investors that the Fed would act to stem any Wall Street collapse that threatened a wider fallout. The S&P 500 Index rose just more than 1% in the week ending May 2 and is up 12% from its 2008 low on March 17. These gains have chipped away at year-to-date losses for the index, now registered at 3.7%. The Dow Jones Industrial Average climbed 1.3% last week. It's up 14% from its 52-week low on Jan. 22. Volatility, as measured by the CBOE's market-volatility index, or VIX, has fallen to its lowest level in more than four months.
'Recession lite'
Last week, stocks got a lift from reports on first-quarter economic growth and April job losses. Both confirmed many economists' projections that the economy has slipped into a recession, but sparked optimism that the downturn is unlikely to be prolonged or severe. "Recent economic indicators have been soft but are definitely not in the deep recession camp," said Stuart Hoffman and Robert Dye, economists at PNC Financial Services, in a report Friday. "So far, this looks more like 'recession lite.'" The Federal Reverse's decision to cut interest rates by a quarter-percentage point, and perhaps more importantly, give tentative signals that it was nearing the end of its rate cuts, also gave a belated lift to stocks. So did its decision Friday to widen its bank-lending program. On Friday, a survey compiled by the CFA Institute found that chief executives, portfolio managers and analysts attending the group's upcoming global-finance conference predicted a difficult environment ahead for equities. More than one-third estimated that the U.S. recovery from the credit crunch will take longer than 18 months.
Econ, earnings next week
For the week ahead, investors face a lighter week of economic news than during the past week. Highlights include the Institute for Supply Management's services index and the Fed's senior loan-officer survey, both out Monday; consumer credit on Wednesday; and jobless claims on Thursday. A handful of large companies tied to the consumer will report earnings next week.
Weekly KLSE Update and Oultook
BT: SHARE prices on Bursa Malaysia ended broadly lower in lacklustre trade yesterday with plantation counters, namely IOI Corp, Asiatic and Sime Darby, leading the decliners list, a dealer said. At the close, the benchmark Kuala Lumpur Composite Index (KLCI) shed 8.38 points to 1,271.48. The counter opened 8.05 points higher at 1,287.91. The Industrial Index shed 25.39 points to 2,669.8, the Finance Index dropped 34.63 points to 9,909.94 and the Plantation Index fell 194.13 points, or 2.5 per cent, to 7,570.06.
True to form, the KLCI unfolded its technical pullbacks in its bid to dilute its overbought market momentum. The KLCI retraced 16.60 points over the last four trading days. With the technical pullback over the last four trading days, the KLCI is on track to stage a re-test of the support of the neckline (1,264) of its double-bottom pattern formation. Next week, the KLCI's overhead resistance zone hovers at 1,275 to 1,309 points while its downside support is at 1,233 to 1,267 points.
MarketWatch: The wild card is that a disappointment from some familiar quarters -- housing, financials and the credit markets -- could knock stocks back into the red, investment managers say. "The markets have taken the collective bit in their mouths, embraced the belief that the worst is behind us with the housing situation and that the financial contamination will get better from here," said Jeffrey Saut, chief investment strategist for Raymond James. But Saut, for one, isn't a believer. "I think we're going to get a pullback," he added. The U.S. stock markets, lately rising on investors' newfound willingness to take on risk, will try to cling to their nearly two-month rally during next week's round of economic and corporate news. The trigger to this collapse could come in the form of more big write-downs or losses from banks, signs that the spring home-sales season will fall flat or a new wave of consumer-loan defaults. These could wipe out the recent optimism that the housing-related credit crunch and financial crisis may be over, a sentiment that analysts say has spurred a recent return to stocks. Those concerns, echoed by other investment strategists, haven't yet derailed a market rebound that began the third week of March when the Federal Reserve announced an unprecedented rescue plan to ensure the solvency of Bear Stearns Cos., reassuring investors that the Fed would act to stem any Wall Street collapse that threatened a wider fallout. The S&P 500 Index rose just more than 1% in the week ending May 2 and is up 12% from its 2008 low on March 17. These gains have chipped away at year-to-date losses for the index, now registered at 3.7%. The Dow Jones Industrial Average climbed 1.3% last week. It's up 14% from its 52-week low on Jan. 22. Volatility, as measured by the CBOE's market-volatility index, or VIX, has fallen to its lowest level in more than four months.
'Recession lite'
Last week, stocks got a lift from reports on first-quarter economic growth and April job losses. Both confirmed many economists' projections that the economy has slipped into a recession, but sparked optimism that the downturn is unlikely to be prolonged or severe. "Recent economic indicators have been soft but are definitely not in the deep recession camp," said Stuart Hoffman and Robert Dye, economists at PNC Financial Services, in a report Friday. "So far, this looks more like 'recession lite.'" The Federal Reverse's decision to cut interest rates by a quarter-percentage point, and perhaps more importantly, give tentative signals that it was nearing the end of its rate cuts, also gave a belated lift to stocks. So did its decision Friday to widen its bank-lending program. On Friday, a survey compiled by the CFA Institute found that chief executives, portfolio managers and analysts attending the group's upcoming global-finance conference predicted a difficult environment ahead for equities. More than one-third estimated that the U.S. recovery from the credit crunch will take longer than 18 months.
Econ, earnings next week
For the week ahead, investors face a lighter week of economic news than during the past week. Highlights include the Institute for Supply Management's services index and the Fed's senior loan-officer survey, both out Monday; consumer credit on Wednesday; and jobless claims on Thursday. A handful of large companies tied to the consumer will report earnings next week.
Weekly KLSE Update and Oultook
BT: SHARE prices on Bursa Malaysia ended broadly lower in lacklustre trade yesterday with plantation counters, namely IOI Corp, Asiatic and Sime Darby, leading the decliners list, a dealer said. At the close, the benchmark Kuala Lumpur Composite Index (KLCI) shed 8.38 points to 1,271.48. The counter opened 8.05 points higher at 1,287.91. The Industrial Index shed 25.39 points to 2,669.8, the Finance Index dropped 34.63 points to 9,909.94 and the Plantation Index fell 194.13 points, or 2.5 per cent, to 7,570.06.
True to form, the KLCI unfolded its technical pullbacks in its bid to dilute its overbought market momentum. The KLCI retraced 16.60 points over the last four trading days. With the technical pullback over the last four trading days, the KLCI is on track to stage a re-test of the support of the neckline (1,264) of its double-bottom pattern formation. Next week, the KLCI's overhead resistance zone hovers at 1,275 to 1,309 points while its downside support is at 1,233 to 1,267 points.
* Buffett and Munger. In the weekend AGM of Berkshire, both men have this to say:- possibility of US financial meltdown has declined recently, big gains in the stock markets not expected in the future, banks and brokerages are getting too big/complex to run, derivatives is "finanacial weapons of mass destruction" and current credit crisis worse than Enron's.
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