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With Europe’s debt woes casting a long shadow, stocks in the coming week could be vulnerable to the impact of slowing global growth on corporate America and the U.S. economy.
Earnings from more than a quarter of the S&P 500 and the first look at second-quarter GDP could be key for the market, which benefited in the past week from the idea of more Fed easing . At the same time, worries about Europe returned at the end of the week as the euro sank and Spanish bond yields shot to record highs amid worries that Spain, itself, may need a bailout.
Early in the coming week, flash PMI data is expected for China and Europe, which should show how well manufacturing activity is holding up. Analysts are watching to see if there are any signs China’s slowdown is bottoming.
Friday’s U.S. GDP report, expected by economists to show 1.5 percent growth for the second quarter, could have a major impact on sentiment, even though it is a backward looking indicator.
“The second-quarter GDP report could be the whack across the forehead that things are really slowing here,” said Barry Knapp, head of U.S. equity portfolio strategy at Barclays. If the number is weaker than expected, Knapp said it could be troublesome for stocks.
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