Market Perspective for March 9, 2015

U.S. stocks opened modestly higher at the open and Treasury yields lower, both reversing course from last week. The major indexes remain within striking distance of their all-time highs despite last week’s small pullback. Technology has been driving the market, with the Nasdaq leading the way. Apple (AAPL), a top component of the Nasdaq (and soon the DJIA) will unveil its new smart watch this week.

There won’t be a lot of economic data released this week, paving the way for the bailout in Greece to retake center stage as European countries meet to discuss its debt restructuring plan. They could accept it or reject it at this meeting, or delay a decision. Greece’s finance minister Varoufakis said the country might decide to hold a referendum or new elections if the deal gets rejected. Many voters were unhappy with the Syriza-led government’s deal with creditors last month and a new vote would likely increase the power of the more radical factions.

The euro is likely to remain under pressure even if a Greek debt deal is approved because a large Austrian bank recently went bankrupt and it now looks like it could bankrupt the state of Carinthia. Since the debacle in Cyprus, bank failures are now being dealt with by forcing depositors to take losses, receiving bank equity instead of their money (the so-called “bail-in,” a policy now in force in most of the world). The Austrian government will not bail out the bank, and since Carinthia has a national guarantee on the bonds, it exposes them to a significant liability and potentially sending them into bankruptcy as well. Austrian banks are heavily exposed to Eastern Europe, a problem since 2008 and one that intensified as the war in Ukraine spread.

In the United States, interest rates will be in focus. Strong jobs data from February again has investors looking for an earlier rate hike from the Fed. Interest rates at the long end of the yield curve jumped last week, hurting rate sensitive sectors such as utilities and REITs. The financial sector also bounced on the news, as higher rates are more profitable for banks.

This is a very light week for economic data and earnings reports. Wholesale inventories for January are out on Tuesday; the number won’t move the market, but it will determine whether current GDP estimates rise or fall. Retail sales for February will be reported Thursday, along with business inventories for January. Also this week, China will report fixed asset investment data for the first two months of the year.

Earnings reports will be relatively light over the coming week. Barnes & Noble (BKS), Aeropostale (ARO), Dollar General (DG), Urban Outfitters (URBN) and Men’s Wearhouse (MW) are among those reporting. Solar has been attracting attention of late, so JA Solar’s (JASO) earnings will be closely watched.

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