By Chuck Mikolajczak and Caroline Valetkevitch
NEW YORK, March 24 U.S. stocks could break
through to all-time closing highs this week, but it could
depend on a solution to Cyprus' fiscal woes.
On Sunday, Cypriot President Nicos Anastasiades held
last-minute talks with international lenders in an effort to
save the island nation from financial meltdown. Cyprus faces a
Monday deadline to avert a collapse of its banking system.
As talks heated up over a rescue package, Anastasiades
threatened to resign in an exchange over a proposal to shut down
two Cypriot banks, according to a senior official taking part in
While Cyprus accounts for a only a fraction of euro zone
economic output, the wrangling over a 10 billion euro($13
billion) bailout package kept markets on edge throughout last
The S&P 500 fell last week for the first time in four weeks,
with weakness linked to uncertainty overseas.
The key unresolved issues for Cyrpus are how the country
should raise 5.8 billion euros from its banking sector toward
its financial rescue, and how to restructure the island's
overgrown banks. Investors are worried about the
possibility of Cyprus leaving the euro zone.
S&P 500 futures began trading lower, falling 2.1
points late Sunday before turning near flat. S&P E-mini futures
were also nearly flat after briefly trading down.
Strategists said the situation could remain unresolved until
Monday. "I think it's going to spill into tomorrow," said Fred
Dickson, chief market strategist at D.A. Davidson & Co. in Lake
Even news that negotiations are ongoing, however, may be
seen as positive by the market. "As long as they are talking,
that will be enough to placate the market," said Quincy Krosby,
market strategist at Prudential Financial in Newark, New Jersey.
Last week, investors reacted harshly to proposals by
European officials to tax depositors, including those protected
by depositor insurance, to fund the bailout. The tax proposals
sparked some selling as investors feared such a plan could set a
precedent for dealing with other troubled euro zone economies,
and set off bank runs across the continent.
Assuming Cyprus' troubles are solved, investors will turn
their attention to economic data due during the
holiday-shortened week, with equity markets closed on Friday for
the Good Friday holiday.
The U.S. data will include orders for durable goods and
pending home sales for February as well as the final reading of
fourth-quarter gross domestic product.
On Sunday, Italian news agency ANSA said the International
Monetary Fund is planning to cut its U.S. growth forecast for
this year due to higher taxes and spending cuts, citing a draft
of the IMF's next World Economic Outlook report.
Stronger U.S. economic data has helped stocks rally this
year, and the S&P 500 could once again make a run
at its all-time closing high of 1,565.15 this week, if the
market returns to its up trend. For all of the worry about
Cyprus, the S&P only dipped 0.2 percent last week and the
benchmark index remains up more than 9 percent for the year.
"People are looking at a better backdrop, whether it is the
jobs data, the GDP data or the consumer stepping up on the
retail sales side in spite of fiscal drag," said Sandy Lincoln,
chief market strategist at BMO Asset Management U.S. in Chicago.
Stocks could see another boost in the form of quarter-end
"window dressing" in which money managers add outperforming
stocks to their portfolios.
"You are coming into the end of the quarter, everybody has
some great results. You are going to get some window dressing on
some of the stocks that are doing well," said Paul Mendelsohn,
chief investment strategist at Windham Financial Services in
With earnings season several weeks away, only nine S&P 500
companies are expected to report quarterly results this week,
including discount retailer Dollar General Corp and video
game retailer GameStop Corp.
Only a few companies released results last week, but they
were disconcerting. Oracle Corp, the world's No. 3
software maker, fell well short of revenue expectations. FedEx
Corp, the second-largest U.S. package delivery company,
cut its forecast for the year.
According to Thomson Reuters data, of the 491 companies in
the S&P 500 that have reported quarterly earnings, 69 percent
have topped analysts' expectations, compared with 62 percent
since 1994 and 65 percent over the past four quarters.
A strong showing this week could push the index past both
its record closing high as well as its record intraday high of
But the index has faced stiff resistance in prior attempts
to break the mark, climbing as high as 1,563.62 before losing
steam. As more attempts to break the mark fall short, the
likelihood of a bigger dip that many analysts have been
"Every time it gets up there, it seems to sell off, so you
have to get through that resistance point," Mendelsohn said.
"Once we get through that resistance point that will
probably bring more buyers in. If you can't get through it, that
will probably encourage some of the sellers a little bit."