By Rodrigo Campos
NEW YORK, Sept 30 Wall Street will open October
with a busy week, highlighted by low expectations for global
manufacturing data and the U.S. jobs report. Any positive
surprises may help lift the market.
Spain is the wild card. And if it's played well, then the
bulls might dance.
The S&P 500 finished its third positive quarter
in the last four on Friday, despite suffering its largest weekly
percentage decline since June. For the past three months, the
S&P 500 gained 5.9 percent - its best third quarter since 2010.
In contrast, the index was down 1.3 percent for the week.
The benchmark S&P 500 earlier this month reached its highest
level since late 2007. Yet uncertainty remains over whether
stocks can hold their gains against the headwinds of a
struggling economy. That explains, in part, the retreat over the
last several days.
The S&P 500 hit a high of 1,474.51 in mid-September before
pulling back by a bit more than 2 percent. A run at 1,500 seems
possible, but the flurry of economic and world events ahead
probably will prevent a major advance in the coming week.
Bulls are betting that last week's Spanish budget proposals
will be a preamble to a bailout request by Mariano Rajoy's
government. The move would be seen as a first step to get the
finances of the euro zone's fourth-largest economy in order and
would clear some of the market uncertainty regarding the euro
Monetary policy is also on the list of market catalysts this
week. Federal Reserve Chairman Ben Bernanke is scheduled to
speak on Monday and the minutes of the latest FOMC meeting are
set for release on Thursday. The week's agenda includes meetings
of the European Central Bank, the Bank of England and the Bank
Brian Jacobsen, chief portfolio strategist at Wells Fargo
Funds Management in Menomonee Falls, Wisconsin, said he believes
"we could see a rebound" this week "if we get some of the stars
aligning and have Spain ask for a bailout, the ECB announcing
favorable terms for that bailout, and if we see the Bank of
Japan announce further monetary intervention.
"If Spain and the ECB don't deliver, we could set ourselves
up for a further lateral move in the markets," Jacobsen added.
"A negative would be if Rajoy flat-out denies that they need a
The ECB and BOJ are set to meet on Thursday, with the Bank
of Japan's meeting extending until Friday.
FACTORIES, JOBS AND THE U.S. ELECTION
Chinese factory and business conditions data will kick off a
numbers-heavy calendar for markets. Manufacturing PMI, due on
Monday, is expected to show a second straight month of
A snapshot of U.S. manufacturing activity will be provided
on Monday when the Institute for Supply Management releases its
September index. The September ISM reading is expected to show
another month of contraction, but at a slightly slower pace than
in August. On Wednesday, the ISM will release its U.S.
services-sector Purchasing Managers' Index, which could show a
slight deceleration in the pace of growth in the
"We have Chinese economic data over the weekend, and we'll
see how markets react on Monday," said Wasif Latif, vice
president of equity investments at San Antonio, Texas-based USAA
"It seems like the market is bracing for bad numbers,
meaning if they're not as bad, it could be market-positive,"
Non-farm payrolls for September, due on Friday, are forecast
to gain 115,000, while the U.S. unemployment rate is seen
ticking up 0.1 percent from August to 8.2 percent in September.
The jobs data will come on the heels of the first of three
U.S. presidential debates, scheduled for Wednesday night.
With just one month to go before election day on Nov. 6,
Wall Street will watch the economic data more closely than it
usually does. In a year when the incumbent president is
campaigning for a second term, the country's economic numbers
tend to become more positive as election day approaches.
The U.S. stock market also tends to gain in years when
incumbents are re-elected, according to the Stock Trader's
For the year, the Dow Jones industrial average is up
10 percent, while the Standard & Poor's 500 Index is up
14.6 percent and the Nasdaq Composite Index is up 19.6
Recent poll numbers point to a strengthening lead by
President Barack Obama, but a weak payrolls reading could give
some hope to Republican challenger Mitt Romney.
"If Romney doesn't turn the ship with a very strong
(debate)performance, the president is going to win," said Jack
de Gan, chief investment officer at Harbor Advisory Corp in
Portsmouth, New Hampshire.
He said the trend in the polls has taken away some of the
market uncertainty regarding the presidential election. He added
that an ECB- or Spain-related headline out of Europe on Thursday
could overcome almost anything that would happen Wednesday night
during the debate.
"I think the market is coming to terms with the fact the
president is ahead, and unless something significant changes,
(he) will prevail."
(Wall St Week Ahead runs every Sunday. Questions or comments
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