By William Spain, MarketWatch
CHICAGO (MarketWatch) -- Investors are entering next week's
markets after five volatile days of trading, and they could
encounter another bruising ride driven by fast-moving events in
Japan, Libya and parts of the Middle East.
A raft of U.S. economic reports could provide some stability,
however. Also, investors will sift through earnings from tech
companies Oracle Corp. (ORCL) , Adobe Systems Inc. (ADBE) , and
Research in Motion (RIMM) . and
"Stocks continue to be supported by strengthening
[gross-domestic product] growth in the U.S. and Europe and
continued solid growth in the emerging economies, plenty of
liquidity and record low interest rates in the U.S., Japan, solid
earnings outlook and reasonable valuations," said John Praveen,
chief investment strategist for Prudential International
Investments Advisers, LLC.
"These positive fundamentals should help stocks rebound."
With a second day of gains Friday, the major indices managed to
pare some of their losses for the week but still ended in the hole.
The Dow Jones Industrial Average (DJI) was off 1.5% while the
S&P 500 (SPX) lost 1.9% and the Nasdaq Composite (RIXF) fell
2.7%.
The week ended with Japanese technicians frantically battling to
bring the radiation leak at the Fukushima Daiichi nuclear plant
under control. The plant was damaged in a 9.0 magnitude earthquake
and subsequent tsunami that killed thousands and left thousands
missing.
Investor sentiment was lifted for part of the session by reports
of a planned cease-fire by Col. Moammar Gadhafi's forces in Libya,
while Western powers including the U.S. moved closer to taking
military action following a United Nations security resolution
authorizing "all necessary measures" to protect Libyan
civilians.
Dozens of anti-government protestors were reported killed in
Yemen, where the president declared a state of emergency. In
Bahrain, security forces cleared the Pearl roundabout, the center
of recent protests, as thousands of mourners voiced antigovernment
slogans at the funeral of a killed protester. There were also
reports of large-scale protests in Syria on Friday, possibly adding
one more to the roster of uprisings in the Arab world.
Home sales, jobless claims
Not all the news was so grim. Helping stocks Thursday was a drop
in weekly jobless claims and jump in the Philadelphia Fed's
regional manufacturing survey to its highest since the early
1980s.
"In terms of economic indicators, the U.S. economy still looked
very solid through March," noted Brian Bethune and Nigel Gault,
economists at IHS Global Insight. They cautioned that consumer
confidence and spending momentum "is in the process of unwinding
rapidly, and the housing market is still deflating.
"The short-term outlook for the U.S. certainly looks much more
subdued than it did even a couple of weeks ago," they wrote.
Monday will bring a report on existing home sales for February,
and on Wednesday, new home sales.
On Thursday, in addition to new jobless claims for the week
ended March 19, there will be a report on durable goods orders for
February.
The big guns come out on Friday with the gross domestic product
revision for the fourth quarter and the March consumer sentiment
report from the University of Michigan.
In a note to investors, Barclay's Capital said that "we expect
GDP growth [for the quarter] to be revised up to 3.2% in the third
estimate, from 2.8% in the second" and that "should largely reflect
greater inventory accumulation, given upward revisions in the
monthly data."
GM, ConAgra
In addition to tech companies, two food giants -- General Mills
(GIS) and ConAgra (CAG) -- will report their latest quarterly
numbers on Wednesday and Thursday, respectively. Electronics
retailer Best Buy (BBY) and restaurant chain Darden (DRI) will also
report Thursday.
On the political front, both the House of Representatives and
the Senate will be out of session while President Barack Obama
heads to points South, visiting Brazil, Chile and El Salvador.
The White House is describing the excursion as linked to U.S.
economy and exports to Latin America, which grew about 6% last year
and account for three times as much as U.S. exports to China.
Certainly, all eyes will be on the progress, or lack thereof, in
containing any further damage at the Japanese reactor but even now,
the impact of the disaster is rippling through the U.S.
The crisis has already meant "repercussions for the U.S.
economy," noted Stuart Hoffman, chief economist at PNC Financial.
Initially, the impact was positive, he noted, as oil prices dipped
on the expectation that Japan would consume less oil due to
production and transportation systems.
Other effects on the U.S. will be "both positive and negative,
but the net impact of a weaker Japan and a weaker global economy
will likely be a moderate downshift to previously strong global GDP
growth for 2011," he said.
Hoffman said he doesn't expect the downshift to derail the
ongoing U.S. economic expansion.
"Opportunities may exist for U.S. manufacturers to gain some
market share but there will also be production bottlenecks in the
U.S. to contend with as Japan deals first with the human crisis,
then repairs, rebuilds and resumes production," he said.