RPT-Wall St Week Ahead – Investors embark on treacherous month

(Repeats item initially run on Friday)

By Edward Krudy

NEW YORK, Aug 29 (BestGrowthStock) – Beaten-up investors go into
September, historically a weak month for stocks, facing key
reports on jobs, manufacturing and services. If those
disappoint, the S&P 500 could breach technical support levels,
pushing stocks yet lower.

The S&P 500 index has fallen nearly 13 percent since April
as investors fret about the chance of a double-dip recession.
But the index has found solid support around the 1,040 level,
with a sustained move below that proving tough.

Federal Reserve Chairman Ben Bernanke boosted stocks on
Friday by signaling the Fed is ready to act if the economy
worsens. But more weakness in upcoming indicators like non-farm
payrolls and Institute for Supply Management surveys would
intensify fears the economy is sliding back into recession.

“There is this continual trend toward numbers falling short
of expectations,” said Nick Kalivas, equity analyst at MF
Global in Chicago. “My guess is you’ll see some selling come in
again this week on these numbers.”

The non-farm payroll report coming on Friday is expected to
show 99,000 jobs were lost in August, swollen by redundancies
among temporary census workers, while private sector hires grew
by only 42,000.

Both the manufacturing and services sectors are expected to
have experienced another slowdown in growth in August. The ISM
manufacturing report is released on Wednesday, followed by the
services sector report on Friday.

ATTRACTING BUYERS

The S&P 500 tested the 1,040 level twice during the past
week, both times ending the day with gains. The level has
consistently attracted buyers over the past 10 months and was
significantly breached only once during a brief stint in July.

“Here we are sitting at this important support level,
having pulled back 8 percent (on an intraday basis) in three
weeks, you potentially set up for a reversal,” said Richard
Ross, global technical strategist at Auerbach Grayson in New
York.

The benchmark Standard & Poor’s 500 index finished last
week at 1,064 on Friday. If the 1,040 level is breached, the
S&P 500 could fall into a lower range around 1,020 to 1,010.
However, the index runs into resistance at its 14-day moving
average at 1,076.65, providing only limited scope on the
upside.

Investor sentiment remains negative. In the options market,
investors bought S&P 500 puts, giving them the right to sell
S&P futures at a fixed price, although the most actively traded
option on the S&P 500 (SPY.P: ) ETF was the $107 call, suggesting
some bullish trades ahead of next week.

“Overall investor sentiment in the option market has become
very skeptical, with put buying widely exceeding call
purchases,” said Ryan Detrick, technical senior analyst at
Schaeffer’s Investment Research in Cincinnati.

The put-to-call ratio, a measure of investor sentiment, was
at 0.61 as of Thursday’s close compared to a 21-day ratio of
0.59.

Investors will be closely following comments from
executives at big industrial companies like General Electric
(GE.N: ) and Boeing (BA.N: ) at Morgan Stanley’s Global Industrials
Unplugged Conference this week.

MAJOR REVENUE ESTIMATES

Intel Corp (INTC.O: ) cut its third-quarter revenue estimates
in a surprise on Friday. Although investors shook off the news
after an initial fall, bleak outlooks from large corporations
at the heart of the economy could rattle investors.

As usual there will be a series of secondary labor market
data playing second fiddle ahead of the Friday’s jobs number.
ADP’s jobs report on Wednesday is expected to show the private
sector added 18,000 jobs in August, down from 42,000 in July.

Weekly claims for jobless benefits are tipped to remain
solidly elevated on Thursday, edging up to 475,000 compared to
473,000 the week before.

With significant risks on the horizon, many investors may
think twice about getting into the market at the start of
September, historically the worst performing month for all
three major indexes.

That may be especially true given the three-day break next
week when U.S. markets shut to observe Labor Day on Monday,
Sept. 6.

Scott Marcouiller, chief technical market strategist at
Wells Fargo Advisors in St. Louis, said he found it hard to
envision a rally in the current environment.

“Right now the market is locked into short-term thinking,”
he said.
(Reporting by Edward Krudy; Additional reporting by Rodrigo
Campos and Leah Schnurr; Editing by Kenneth Barry)

RPT-Wall St Week Ahead – Investors embark on treacherous month