Goldman, Earnings, and more by Ken Mahoney
Even with Friday’s sell off, two of the three major indices – the Dow and the Nasdaq – managed to pull off their 7th consecutive week of gains. The S&P ended slightly lower for the week, but still managed to rise in seven of the last nine weeks.
The mixed week is due in large part to the eruption (no pun intended) that hit Wall Street in the form of a Securities and Exchange Commission suit against Goldman Sachs Group Inc. for failing to disclose to investors key information related to mortgage-backed securities. Friday’s selloff saw the Dow fall 125.91 points, the S&P 19.54 points, and the Nasdaq 34.43 points. The SEC's civil suit could put some strain on the financial sector for a while, as there is still uncertainty about whether regulators will pursue additional institutions. Lawmakers have pledged to boost their efforts to investigate practices and complex investments that contributed to the financial crisis.
Even as some eyes will remain focused on Goldman and the SEC this week, there may be enough good news to keep the markets chugging along. So far, less than 10% of the S&P 500 has reported results, and 123 companies are due to report this week. Earnings have been coming in strong to this point, and according to Thomson Reuters, they are on track to have risen 39% from a year ago. Revenues are on track to have risen 10% from a year ago.
With the S&P up over 80% since the bottom on March 9th, 2009, some analysts predict that stocks are due for a pullback, but earnings will play a large part in how the market performs in the weeks ahead. Let’s hope that the overall financial health of corporate America helps prevent a near-term correction.
Key things we’ll be watching this week:
Monday – Leading Indicators
Tuesday – Redbook
Wednesday – EIA Petroleum Status Report
Thursday – Producer Price Index, Jobless Claims, Existing Home Sales
Friday – Durable Goods Orders, New Home Sales
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, Google Finance, Barron’s, djindexes.com, MSCI Barra. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not available.
HEADLINES:
The SEC's recent suit against Goldman is the agency's biggest assault on a Wall Street firm in a matter stemming from the credit crisis. The SEC said that in early 2007, as the U.S. housing market teetered, Goldman Sachs created and sold a CDO linked to subprime mortgages without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against the vehicle, known as Abacus 2007-AC1.
Greek officials said Sunday that the cloud of volcanic ash that has disrupted air travel in much of Europe could postpone a key meeting with European and International Monetary Fund officials on aid for the country. Representatives of the European Commission, the European Central Bank, and the IMF were scheduled to gather on Monday for two weeks of talks on technical details of a joint aid package. That package, if needed to avert a Greek insolvency, could provide Athens with an estimated €45 billion this year. Most northern European airports have been shut until at least Sunday night, with chances of further delays reaching into Monday or beyond.
U.S. Treasury Secretary Timothy Geithner on Sunday expressed confidence that lawmakers will bridge partisan differences on the overhaul of financial regulations and pass a bill that protects taxpayers from financing future bailouts. "I am very confident that we're going to have the votes for a strong package of financial reforms that will bring derivative markets out of the dark, help protect the taxpayers from having to fund future bailouts and trying to make sure we're getting Americans some basic protection against fraud and abuse," Geithner told NBC's "Meet the Press."
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Sources:
Marketwatch
The Wall Street Journal Online
Barrons
CNN Money
http://online.wsj.com/article/SB10001424052748704508904575191882961621478.html?mod=WSJ_hpp_MIDDLETopStories
http://www.businessweek.com/news/2010-04-18/u-k-germany-pile-pressure-on-goldman-sachs-after-fraud-suit.html
http://online.wsj.com/article/SB10001424052748704508904575191961384072050.html?mod=WSJ_hpp_LEFTTopStories
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