Wall St Week Ahead For stocks, high anxiety rules

NEW YORK- High anxiety on Wall Street won't subside next week as the deepening credit crunch pushes the global economy into recession and corporate profits increasingly become an afterthought as investors scramble to raise enough cash to weather the credit crisis.

By (Reuters)

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Published: Sat 11 Oct 2008, 9:18 AM

Last updated: Sun 5 Apr 2015, 2:17 PM

On the heels of a panic-riddled sell-off that caused the Dow industrials and the S&P 500 to plummet for eight days in a row, finance ministers and central bankers from the Group of Seven rich industrialized nations met on Friday to discuss jammed credit markets and the staggering global economy. Over the weekend, bankers from the Group of 20 emerging and industrialized nations also were scheduled to meet in Washington ahead of the International Monetary Fund and World Bank meetings.

While corporate earnings season gets into full swing next week, results will likely be on the back burner as investors struggle to see through the fog of fear that has engulfed the market.

Among financial institutions, JPMorgan Chase & Co, Citigroup, and Capital One Financial Corp are all expected to release results.

Investors also will get a reading on September inflation with the release of the U.S. Producer Price Index on Wednesday and the Consumer Price Index on Thursday. September housing starts are due on Friday.

But concerns that credit markets have not limbered up, despite a spate of moves to free up money from the Federal Reserve and other central banks, will remain the chief focus for market watchers.

"Normally, I would say we are entering earnings season. But this is purely an emotion-driven market," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Wealth Management in New York.

"It's one where people are trying to raise as much liquidity as possible, and I am getting the sense that the severity of the reaction of the past few days tells you that maybe we are getting relatively close to raising enough capital."

On Friday evening, Treasury Secretary Henry Paulson said the United States is planning to buy equity stakes in financial institutions to help recapitalize banks.

WORST WEEK EVER FOR THE S&P 500

This week's coordinated interest-rate cuts from global central banks, including the Fed, failed to put an end to the nosedive in stocks as investor confidence remained severely strained.

It was the worst week on record for the Standard & Poor's 500 Index, which closed on Friday below the 900 level for the first time in 5-1/2 years. At Friday's closing bell, both the Dow Jones industrial average and the S&P 500 were down 18.2 percent for the week, while the Nasdaq Composite Index was down 15.3 percent.

Since the beginning of October alone, all three major indexes have skidded more than 20 percent.

Analysts said they were hoping to see a coordinated move come out of the G7 to ease the cost for banks to borrow overnight dollars from, or among, each other.

"There's some talk that the coordinated central banks of the G7 will look to basically insure interbank deposits," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co, in San Francisco.

"So that would drive Libor down and basically tell the banks, 'Look, do your normal business, if anything goes wrong, we'll pay for it.'"

But a G7 official said on Friday afternoon that the group of major nations was unlikely to adopt Britain's proposal to guarantee lending between banks.

The G7, which is made up of the world's industrialized nations, vowed to take all necessary steps to unfreeze credit markets and ensure banks can raise money, but they offered no collective course of action to avert a deep global recession, according to a brief communique released on Friday evening.

Analysts noted that markets have slumped to oversold territory. And while stocks might see a reflex bounce-back, a significant rally is unlikely to be sustainable as long as fear continues to rule.

"There's blood in the water and the sharks are circling," said Kurt Brunner, portfolio manager at Swarthmore Group in Philadelphia.

"But this constant selling, you would think, has to ease at some point," Brunner added.

INTEL'S EARNINGS AND CPI ON TAP

Along with financials, the tech sector will be in the earnings spotlight next week, with Intel, Google and eBay set to post results. This week, IBM released better-than-expected preliminary results, which gave investors reason to feel some optimism about the resiliency of tech companies.

On Monday, the U.S. Treasury bond market will be closed for the Columbus Day holiday. But the stock market will be open.

Among the coming week's major economic indicators, September PPI and retail sales are due on Wednesday, while the CPI and the Philadelphia Fed's October business index are set for Thursday. Investors also will look for the NAHB housing market index on Thursday, as well as the Federal Reserve's report on September industrial output and capacity utilization.

On Wednesday afternoon, the Fed will release its "beige book" of anecdotal reports on regional economic conditions.


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