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by Peter Switzer

Get ready for a sell-off today and until some really good news happens, we could be in the current up-and-down phase with a tendency to the downside. But it’s totally understandable when you look at the drivers for this tentative negativity.

When you add the China economic growth slowdown to question marks over Spain with rising bond yields and some softer economic data in the US coming as the Fed has been suggesting no more quantitative easing, it’s bound to create a retreating stock market. This is particularly the case given that the S&P 500 index, which can be a key driver of our stock market is up 8.96 per cent for the year.

Wall Street on Friday

For those who want the Wall Street closes, the Dow dropped 136.99 points, or 1.05 per cent, to 12,849.59 while the S&P 500 index lost 17.31 points, or 1.25 per cent, to 1370.26.

To understand this market, you have to know that banks in the US, such as JPMorgan and Wells Fargo have reported better than expected but their stock prices fell on Friday. Financials have question marks over them because of worries about the European banking system if the likes of Spain becomes a possible defaulter and some big US banks could have some mortgage foreclosures issues. That said, I think a lot of this is excessively negative speculation that will eventually be dealt with.

I think the neatest summary for what’s going on now came from Bruce McCain, chief investment strategist at Key Private Bank, talking on CNBC.

“The path of least resistance in the short-term is for a correction,” he said. “We have not yet decoupled from markets in Europe and Asia — if they sneeze, we won’t necessarily catch pneumonia, but the idea that we’ll avoid any signs of a cold is optimistic.”

Adding to the anxiety, consumer sentiment in the US headed south, and that didn’t help matters. Also, late last week a number of Fed officials were pondering whether interest rates in the USA could really be left on hold until 2014, as Fed boss Ben Bernanke has indicated.

What’s ahead?

Fortunately, there’s a lot of data and some really important company reporting out this week, which will help us better understand the health of the US economy and its corporate sector.

The big watch issues include — retail sales, manufacturing in the state of New York, key health of housing data, the Philadelphia Fed survey, leading indicators and profit reports from the likes of Citigroup, Goldman Sachs, IBM, Intel, Blackrock, Yum Brands, Morgan Stanley and McDonald’s.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Watch more from Peter on SWITZER TV.

Published on: Monday, April 16, 2012

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