By Barbara Kollmeyer, MarketWatch
UBS strategists: Now isn't the time to bail out of stocks
MADRID (MarketWatch) -- U.S. stock futures indicated a slightly
firmer start for Wall Street on Monday as investors looked to claw
back some territory after the worst weekly finish for the S&P
500 in two years.
Some inspiration, though not much, was coming from news of the
rescue for a troubled Portugal bank.
Futures for the Dow Jones Industrial Average (DJU4) rose 38
points to 16,454, while those for the S&P 500 index (SPU4) rose
5.6 points to 1,924.20. Futures for the Nasdaq-100 index (NDU4)
rose 5.7 points to 3,881.25.
The data calendar is empty for Monday, while the earnings
calendar is also bare-bones. One small inspiration was news of a
bailout plan for Portugal's Banco Espirito de Santo SA .
Portugal's central bank late Sunday announced a rescue plan that
includes breaking up the bank and pouring in billions of euros in
state money. The upheaval surrounding the bank has gotten some
investors worried about a renewal of turmoil for Europe's banking
system.
Otherwise, without much else to go on though -- no U.S. data is
scheduled -- investors will likely be focusing on last week's
performance, which included the biggest weekly drop in two years
for the S&P 500 (SPX) . Nonfarm-payroll data missed forecasts,
but still added to a pile of indicators that signaled sustained
momentum for the economy, firming up the view among many investors
that the Federal Reserve could raise interest rates sooner than
forecast.
The S&P 500 lost 2.7% last week, the worst percentage drop
for the index since June 1, 2012, while the Dow industrials (DJI)
fell 2.8%, its biggest drop since the week ended Jan. 24.
Low volumes
Joao Monteiro, analyst at Valutrades, said in a note that given
the lack of data and earnings for Monday, there could be a
temporary lull in the selling that's been seen recently. Still, he
said investors must remember that August is notorious for
lower-than-average volumes.
"It could now be a case of traders sitting on hands in the short
term, although with at least the economic calendar set to pick up
from tomorrow, any calm could be short lived," he said.
Readings on services and factory orders are due Tuesday, while
data on trade and consumer credit follow later in the week. Read:
Paltry credit-card debt growth signals restrained consumer
Mark Haefele and Kiran Ganesh of UBS Wealth Management wrote in
a commentary that with valuations are neither at extremes, nor are
investors "exuberant," investors should not be panicked out of
stocks.
"With U.S. GDP growth still on track, the Fed remaining
accommodative, and cash still on the sidelines, now is not the time
for investors to head to the exit," said Haefele, global chief
investment officer, and Ganesh, cross-asset strategist, in a piece
published on CNBC's website. Also read Need to Know for Monday:
Traders put big hedges in places as markets set up for a
rebound
Cardinal Health Inc. (CAH) and Michael Kors Holdings Ltd. (KORS)
will report results before the bell on Monday, as earnings season
dwindles down. Berkshire Hathaway Inc.(BRKA) (BRK/A) could be
active after reporting a rise in second-quarter profit and revenue
late Friday.
In overseas markets, the Stoxx Europe 600 index failed to take
much inspiration from Portugal's bank-rescue news, though stocks in
Lisbon were slightly up. Asian stocks had a mixed session, with the
Shanghai Composite Index up 1.7% and the Nikkei 225 index off
0.3%.
Gold prices (GCU4) were flat, while oil (CLU4) ticked higher and
the dollar (DXY) recouped some losses from last week.
More must-reads from MarketWatch:
History says don't count on a big correction soon
Three market signs point to 20% tumble for U.S. stocks
Warning: That plunge in stocks is just the beginning
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