Wall St Week Ahead: Euro-zone troubles may keep stocks on edge

By Caroline Valetkevitch

NEW YORK, May 14 (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) could face more
volatility next week as growing doubts about whether Europe
can solve its deepening debt crisis are likely to take center
stage again.

A $1 trillion rescue package unveiled at the week’s start
gave only temporary relief to investors, who are increasingly
worried about the impact of the crisis on the global recovery
and the euro.

Wall Street also will be anxious to see the results from
retailers next week, and will pay special attention to their
forecasts for the rest of the year. Wal-Mart Stores (WMT.N: )
and Lowe’s Co (LOW.N: ) are among companies expected to report.

Below-par results on Friday from retailers, including
Nordstrom (JWN.N: ) and J.C. Penney Co Inc (JCP.N: ), cast some
doubt on the consumer’s health.

The week also brings government data on inflation, which
is expected to remain tame, and on housing, a sector still
struggling to recover from the country’s worst economic
downturn since the 1930s.

The three major U.S. stock indexes ended Friday’s session
with losses ranging from 1.5 percent to 2 percent amid worries
over Europe’s debt problems. The CBOE Volatility Index (.VIX: )
or VIX, which is Wall Street’s fear gauge, jumped 17.1
percent. Commodity prices also dropped sharply, with oil
sliding to a three-month low below $72 per barrel. The euro
fell to an 18-month low against the dollar.

“We have had good fundamentals in terms of the earnings
news and macro news, but nobody seems to be paying any
attention to that any more. All they’re worried about is
what’s happening in Europe,” said John Praveen, chief
investment strategist at Prudential International Investments
Advisers LLC in Newark, New Jersey.

For the week, however, the Dow Jones industrial average
(.DJI: ) rose 2.3 percent, while the Standard & Poor’s 500 index
(.SPX: ) gained 2.2 percent and the Nasdaq (.IXIC: ) climbed 3.6
percent.

FED MINUTES, CPI AND HOUSING

Minutes from the Federal Reserve’s April 27-28 meeting
also will be released on Wednesday.

Investors will look for clues on when the benchmark
interest rate, held near zero since Dec. 16, 2008, could
change.

The U.S. Producer Price Index for April, due on Tuesday,
is forecast up 0.1 percent, compared with a gain 0.7 percent
in March. Core PPI, which excludes volatile food and energy
prices, is forecast up 0.1 pct in April versus a gain of 0.1
percent in March.

The Consumer Price Index for April, due on Wednesday, is
seen up 0.1 percent after a March gain of 0.1 percent, while
core CPI, omitting volatile food and energy prices, is seen up
0.1 percent in April versus no change in March.

A slight uptick in housing is expected to be shown in both
the National Association of Home Builders’ May index on Monday
and April housing starts on Tuesday.

Housing starts are expected to rise in April to a
seasonally adjusted annual pace of 650,000 units from 626,000
in March.

TAKING RETAILERS’ PULSE

With consumer spending accounting for about two-thirds of
the U.S. economy, investors still see a healthy retail sector
as a major ingredient to the economic recovery.

“You’ve built in a level of expectations and there’s this
big hope that the consumer is going to bring us back, and
business spending is going to bring us back,” said Peter
Boockvar, equity strategist, at Miller Tabak & Co. in New
York.

With results in from 459 of the S&P 500 companies,
first-quarter S&P 500 earnings are expected to be up 56.6
percent from a year ago, according to Thomson Reuters data.
That’s up from an April 1st estimate for a gain of 36.6
percent.

Some 77 percent of the companies that have reported have
beaten earnings expectations — well above the 61 percent in a
typical quarter, the data showed.

But the reaction in the stock market to the quarter’s
mostly stronger-than-expected results has been muted, largely
because of the focus on Europe.

“We know we have good economic activity here, and
basically the market is worried that what’s good this year is
going to turn into bad next year as the problems in Europe
ripple throughout the rest of the world and slow down the
growth,” said Jim Awad, managing director at Zephyr Management
in New York.

Among the retailers on next week’s agenda are Dow
components Home Depot (HD.N: ) and Wal-Mart, who will report on
Tuesday, along with teen retailer Abercrombie & Fitch Co
(ANF.N: ).

After Tuesday’s closing bell, tech bellwether and Dow
component Hewlett-Packard (HPQ.N: ) will report results.

U.S. discount chain Target Corp (TGT.N: ) will release
quarterly results on Wednesday morning.

Retailer Limited Brands (LTD.N: ), which owns lingerie
powerhouse Victoria’s Secret, is set to report earnings on
Wednesday after the closing bell.

On Thursday, quarterly scorecards are due from video game
retailer GameStop Corp (GME.N: ), moderately priced women’s
clothing retailer Ross Stores (ROST.O: ); major U.S. office
supplies retailer Staples (SPLS.O: ), and personal computer
maker Dell Inc (DELL.O: ).
(Wall St Week Ahead runs every Friday. Questions or comments
on this column can be e-mailed to:
caroline.valetkevitch(at)reuters.com )

Stock Market

(Reporting by Caroline Valetkevitch; Additional reporting by
Leah Schnurr and Edward Krudy; Editing by Jan Paschal)

Wall St Week Ahead: Euro-zone troubles may keep stocks on edge