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Mutual Funds - Mutual Funds.
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Posted by Monitor on June 27, 2009, 4:15 am
Wall St Week Ahead: Stocks eye jobs, other data in July 4th week
JPMorgan Securities said in a research note that the Standard & Poor's
500 was facing a correction that would likely send the index down to
830 to 875, which would represent a 5 to 10 percent drop from its
current level.
NEW YORK, June 26 2009 (Reuters) - For stock investors, June's job
report could be a make-or-break factor next week in determining
whether the recent rally has legs or not.
The monthly non-farm payrolls data will come out on Thursday, instead
of the usual Friday. U.S. markets will be closed on Friday, July 3rd,
for the long Fourth of July, or Independence Day, holiday weekend.
Investors will pick apart the job figures and reams of other economic
data released during this four-day week to assess if recent signs of
stabilization point to a sustainable economic recovery. Consumer
confidence, the Institute for Supply Management's June index on U.S.
manufacturing activity, and domestic car sales are among the major
indicators on tap.
Although the U.S. economy has been mired in a recession since December
2007, investors' optimism has increased since early March amid growing
signs that the extent of the economic slump is moderating.
That optimism has provided a crucial underpinning to stocks since the
Standard & Poor's 500 Index .SPX hit a 12-year closing low on March 9.
This spring, the S&P 500 climbed as much as 40 percent from that low;
at Friday's close, it was still up 35.8 percent.
While unpleasant surprises may trigger a long-awaited correction,
analysts said evidence of further economic stabilization would make
the bulls grow bolder and help stocks break out of their recent
consolidation range.
"It is going to depend a lot on where the surprise is," said Peter
Jankovskis, co-chief investment officer at OakBrook Investments LLC in
Lisle, Illinois, referring to the non-farm payrolls data.
"In the last report, people looked at the fact that the decline in
payrolls was not nearly as large as expected, but the unemployment
rate jumped tremendously. At the end of the day, that jump trumped
things."
JOBLESS RATE NEAR 10 PERCENT
U.S. non-farm payrolls are forecast to lose 355,000 jobs in June
versus May's slide of 345,000, according to economists polled by
Reuters.
The U.S. unemployment rate is projected to jump to 9.6 percent in June
from 9.4 percent in May.
"We think that a spike in the rate of unemployment could actually be a
positive, as it may signal that discouraged workers are coming in from
the sidelines and starting to look for work again," said Phil Orlando,
chief equity market strategist at Federated Investors in New York.
"There may be something else that plays out next week, a sort of
portfolio window dressing effect. There's still a ton of cash sitting
on the sidelines right now."
At Friday's close, the three major U.S. stock indexes finished the
week mixed. The blue-chip Dow Jones industrial average .DJI slipped
1.2 percent, while the S&P 500 dipped 0.3 percent, and the
Nasdaq .IXIC gained 0.6 percent.
Holiday-shortened weeks tend to be volatile.
At the closing bell on Tuesday, Wall Street will write "finis" on
trading for both the month of June and the second quarter. So there
could be even more choppiness amid so-called "window dressing" next
week. That ritual calls for money managers to dump some losers and
snap up recent standouts to spruce up portfolios -- and their
quarterly returns.
MADOFF AND MOUNDS OF NUMBERS
Besides the focus on the economy, the holiday-shortened week will
feature what promises to be a big spectacle -- the sentencing on
Monday of confessed swindler Bernard Madoff for running a $65 billion
Ponzi scheme.
In addition to the U.S. Labor Department's June jobs data, other
reports to watch next week will include Tuesday's S&P/Case-Shiller
reading on April home prices, the Chicago Purchasing Managers Index of
June business activity in the U.S. Midwest, and the Conference Board's
June consumer confidence report.
The ADP national employment survey for June is due on Wednesday, along
with the Institute for Supply Management's June reading on
manufacturing, May pending home sales, May construction spending and
June domestic car and truck sales.
On Thursday, there will also be weekly initial jobless claims, which
in recent weeks have also tended to reinforce some hope of
stabilization, and data on May factory orders.
"It seems that the market is at least comfortable with the fact that
the economy is on the horizon of the recovery. It's certainly not
getting any worse," said Cleveland Rueckert, market analyst at Birinyi
Associates Inc in Stamford, Connecticut.
"Our research shows that the market typically bottoms at the end of
the recession, so confirmation of that will fuel continued gains.
We're bullish long term."
With the start of the second-quarter earnings season looming,
investors will keep an eye out for companies' outlooks or pre-
announcements. Aluminum producer Alcoa Inc (AA.N) is due to kick off
the earnings season when it reports on July 7.
The Federal Reserve speakers' roster includes a speech by Federal
Reserve Bank of St Louis President James Bullard on the Fed's exit
strategies on Tuesday, the very same day that Federal Reserve Bank of
Kansas City President Thomas Hoenig speaks on bankruptcy and financial
crisis.
The S&P 500 has gained about 40 percent since touching down at a 12-
year low in early March, but the rally has stalled recently as
investors look for the catalysts for economic growth.
JPMorgan Securities said in a research note that the Standard & Poor's
500 was facing a correction that would likely send the index down to
830 to 875, which would represent a 5 to 10 percent drop from its
current level.
But, as other analysts have predicted, JPMorgan sees a rally by year
end which would take the S&P up to 950 to 1,000.
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