With Catalysts Lacking, Investors to Hunt for Conviction in Coming Week
NEW YORK ( TheStreet) -- Don't be surprised if stocks get stuck in limbo for a while longer.
The reaction to two pieces of major market moving news at the end of the week tells all. Investors welcomed the rise in jobs during February as a healthy indicator of ongoing improvement and gave a small acknowledgement to Greece's successful debt swap which concluded on Thursday. But, all in all, no floor trader was gushing over the news. The reaction to Friday's declaration from the International Swaps and Derivatives Association that Greece was technically in a default was rather muted as stock were still able to close fractionally higher that day. As the dust settles, the question continues to be, now what?
Economists have long said that the eurozone's bigger problem is its long term debt burden, the Achilles heel of economic growth in the region. Growth there shrank last quarter, according to data earlier this week. And, progress on Greece's debt restructuring handily illustrates that austerity begets further austerity.
The U.S. jobs report, while marking a string of three monthly payroll gains above 200,000, still underscores the work policymakers have to do to get hiring back to pre-recession levels. "Temporary hiring in areas such as home health care is making a larger contribution to overall payroll growth, casting some doubt on the quality of new job creation and the sustainability of the broader labor market recovery," said a report by Fitch Ratings on Friday.
In short, there's been no clear catalyst for buyers or sellers. The S&P 500 and Nasdaq indices finished the week essentially flat, while and the Dow Jones Industrial Average has crept slowly under the 13,000 mark. Technical analysts are still fearful that weakness in Dow transport stocks and the Russell 2000 index of small caps forebodes a further stock correction.
"Our feeling is that the remainder of this month will continue to be volatile," says Tom Villalta, market strategist at Jones Villalta Asset Management. "Europe continues to be a headwind and will create sporadic volatility although its importance will diminish as the year goes on."
"We believe the minor market pullback we have been calling for has begun, and we think at Tuesday's close was probably about half over," writes Mark Arbeter, technical analyst with S&P Capital IQ, referring to Tuesday's worst one-day selloff year to date. "While we are still holding out for another shot lower in the S&P 500, perhaps to the 1,330 region, if the index can pop back above the 1,370 tp 1,380 zone, it may be a sign that our 3% to 5% pullback forecast was a bit aggressive... we must be alert to the possibility that the pullback is over based on the rapid snapback."