Investors should be bracing themselves for more volatility as a slew of economic data and key US corporate earnings, including Apple, will either stoke deeper losses or ease concerns about the outlook.
Last week provided further concern about the strength of the world’s two largest economies, the US and China, as the latest data failed to meet expectations. China’s economy expanded at an annual 7.7 percent pace in the first quarter, below the 7.9 pace in the final three months of 2012 and below expectations.
A slew of US corporate earnings did little to help justify Wall Street trading near record highs. Bright spots from companies including Google and Microsoft were not enough to make up for the disappointments such as from IBM.
As a result, Wall Street’s best weekly performance of 2013 was followed by its worst. In the past five days, the Dow Jones Industrial Average dropped 2.1 percent, as did the Standard & Poor’s 500 Index, while the Nasdaq Composite Index sank 2.7 percent.
Companies reporting their latest earnings in the coming days include Caterpillar, DuPont, United Technologies, Boeing, Procter & Gamble, Exxon Mobil and Chevron.
Apple is also set to report its results on Tuesday. The stock closed at US$390.53 on Friday, well below the US$700 it topped in September 2012. Reuters says options pricing indicates the stock price could swing as much as 7.5 percent after the results are released.
Economic indicators released in the coming days include several reports on housing-with existing home sales due Monday, and the FHFA house price index and new home sales due Tuesday.
All eyes will be on Friday’s GDP report. Economists surveyed by Bloomberg News predict the US economy grew at a 3.1 percent annual rate in the first three months of 2013, after expanding at a 0.4 percent pace in the final three months of 2012. Those polled by Reuters predict an increase of 3 percent.
Also due are reports on durable goods orders on Thursday and consumer sentiment on Friday.
Europe’s Stoxx 600 Index shed 2.5 percent for the week. One positive weekend political development came from Italy where Giorgio Napolitano was elected to a second-term as president-a move that might help lessen some concerns about the country’s outlook.
At the G20 meetings in Washington last week, Europe was pushed to make growth a higher priority.
UK markets will respond to Fitch’s decision to downgrade the country’s AAA credit rating to AA+ on Friday, released after the market close. Fitch said the UK economy remains too vulnerable to “adverse economic and financial shocks” to justify its top rating.
Fitch’s decision came after S&P opted to retain its highest rating on the UK earlier this month, while Moody’s lowered it one notch in February.
Commodities investors will be looking to see if the negative sentiment that drove gold and copper sharply lower last week has abated.