UPDATE 2-Wall St Week Ahead: Volume may be lower on Irene impact

Sun Aug 28, 2011 8:07pm GMT
 

* NYSE, Nasdaq plan to open Monday
    * Good night, Irene: Hurricane could depress volumes
    * Focus shifts to Obama from Bernanke
    * Jobs report ahead, ISM factory index seen falling

    By Rodrigo Campos
    NEW YORK, Aug 28 (Reuters) - U.S. stocks are setting up for
another turbulent week, and while Hurricane Irene passed with
less damage than had been feared in many areas, the storm's
impact on public transit near Wall Street could depress trading
volumes.
    Traders juggling European debt worries and soft economic
data are assessing the impact of the storm, which knocked out
subway and train services across the New York City metropolitan
area, issues that may not be resolved by the start of work on
Monday.
    Though the storm itself wasn't expected to be a factor in
broader market direction on Monday -- though many analysts
forecast pressure on insurance and transportation-related
stocks -- there could be some impact as transportation issues
leave many offices short-staffed.
    "If anything, this will just result in lessened volume,"
said Randy Billhardt, head of institutional sales and trading
at MLV & Co in New York.
    "We don't want to put anyone in danger, so getting in will
be based on each person's level of comfort and their ability to
get into the city," he said. "Since this is usually a quiet
week for markets, I won't push anyone to do anything out of
their comfort zone."
    Lighter volume could leave equities susceptible to
heightened volatility, especially given the persisting issues
related to Europe and the upcoming U.S. nonfarm payroll
report.
    The unusually large storm traveled up the U.S. East Coast
Friday through Sunday, threatening 55 million people, and was
expected to cause billions of dollars in property damage as it
continued to barrel north toward eastern Canada as a tropical
storm.
    The New York Stock Exchange, the Nasdaq Stock Market and
the alternative BATS venue said they will start the week as
usual.
    With the hurricane mostly out of the way, the focus may
shift from the Federal Reserve's economic outlook to the August
U.S. payrolls report Friday.
    Fed Chairman Ben Bernanke, in a much anticipated speech to
central bankers in Jackson Hole, Wyoming, on Friday said most
of the burden for ensuring a solid foundation for long-term
growth lay at the feet of the White House and the U.S.
Congress.
    U.S. President Barack Obama is expected to detail plans to
create jobs after he returns from vacation the week after next.
Investors will have a few days to position themselves ahead of
Obama's speech, with the key payrolls report for August due
Friday.
    "This was clearly a punt from Bernanke to Obama, who will
announce a jobs initiative soon," said Lance Roberts, CEO of
Streettalk Advisors, an investment management firm in Houston.
"The market thinks we may now get stimulus from the
government."
    THE WHITE KNIGHT: TRICHET?
    In a move opposite to Bernanke's baton-handing to
Washington, some say stocks may find a white knight in the
European Central Bank's head Jean-Claude Trichet.
    Some hoped that his comments during a panel at Jackson Hole
Saturday would open the door for the ECB to buy more bonds from
countries struggling with rising borrowing costs.
    News this month that the ECB was actively buying government
bonds in the secondary market boosted equities by giving some
relief to investors worried about the credit and fiscal health
of the euro zone.
    "I'm going to see if (Trichet) is standing by that policy
or shying away from it," said Brian Jacobsen, chief portfolio
strategist at Wells Fargo Funds Management in Menomonee Falls,
Wisconsin.
    "If he stands by it, that could be a positive for the
equities markets because it's going to suggest that if
anything, the ECB will try to step in to handle liquidity
problems in the European banking system and they don't have to
just rely on the European Union leaders."
    Recent concern over the exposure of some European banks to
the declining prices of euro-zone bonds pushed lenders' shares
sharply lower, with an index of European bank stocks 
closing lower Friday for a fifth straight week. The long slide
has resulted in European bank shares losing more than
one-fourth of their market value.
    AN UGLY AUGUST
    August is shaping up as the worst month for stocks since
February 2009, partly on the belief that the U.S. economy was
headed for a double-dip recession.
    For the month so far, the Dow Jones industrial average is down 7.1 percent, while the Standard & Poor's 500
Index is down 8.9 percent. The Nasdaq Composite Index is down 10 percent, still in correction mode. Those
losses for August so far threaten to overshadow the bright spot
at Friday's close, when all three indexes ended the day higher
and scored their first weekly gains in more than a month.
    The payrolls report Friday is expected to show the U.S.
economy created 80,000 jobs this month, according to economists
polled by Reuters. In contrast, 117,000 jobs were added to U.S.
nonfarm payrolls in July.
    The U.S. unemployment rate is seen steady at 9.1 percent.
    Wall Street will have to deal with a torrent of data
throughout the week, including personal income and consumption
Monday, S&P/Case-Shiller home prices Tuesday, factory orders
Wednesday and the Institute for Supply Management's factory
activity index Thursday, before Friday's payrolls report.
    A Reuters poll forecasts that ISM's August survey is
expected to show factory activity shrank for the first time
since the recession.
 (Wall St Week Ahead runs every Sunday. Questions or comments
on this column can be e-mailed to:
rodrigo.campos(at)thomsonreuters.com)

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