This coming week could see unstable stocks accumulate more losses as corporates announce first quarter earnings with the strong dollar influencing growth rates.
This week will see traders maintaining high alerts for signals of extended pullbacks after the wipeout on Friday which sent the Dow Jones Industrial Average (DJIA) plummeting more than 250 points.
A margin lending crackdown reported by Chinese regulators early Friday saw a market selloff. Despite this move in China, it will be easier now for investors to trade the market in the country. Added to this, concerns about Greece and its ability to reach an agreement with its creditors, prompted concerns in the European markets. This also added worries about the future of Greece in the euro zone.
Traders are now eagerly anticipating the earnings results from more than a quarter of the S&P 500 index (SPX) companies this week. Thomson Reuters indicated positive results so far showing a 3 to 1 ratio of beaten earnings, while there has also been a 6 percent increase in profits above analyst expectations.
Out of all the first quarter earnings reports released so far, 53% of firms have missed their forecasted revenue. More specifically, in the industrial sector, companies like General Electric (NYSE: GE) and Honeywell (NYSE: HON) could both face additional scrutiny for high profile revenue misses.
Andrew Burkly from Oppenheimer Asset Management anticipates a further pullback in the industrial sector. He went on to indicate that the industrial sector may be the hardest impacted sector based on the strong U.S. dollar (USD). Industrials declined by 2.2% this week making it the worst performer. A counter to the industrials drop were energy gains of 2.1%. Many investors took advantage of this gain believing that oil may have hit its lowest point in mid-March. Rising 8% for the week were the West Texas Intermediate May crude futures seeing a temporary increase above the $56 a barrel mark.
Analysts expect to see a rebound in the markets from a 1.1% decline in the S&P 500 index reported on Friday as more companies gear up to report earnings this week.
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