NEW YORK (TheStreet) -- All eyes will be focused on Spain this weekend, and the events that transpire are likely to have the biggest impact on the direction U.S. stocks take in the coming week.
Eurozone officials are expected to discuss an aid package for Spain's banks over the weekend.
"If they announce some kind of package that's firm and fair, the market would rally," said Adrian Day, president of Adrian Day Asset Management. "If they don't, I don't think it will fall a lot to be honest, because people have gotten used to people in Europe pushing things off."
Day thinks the biggest risk for the market regarding Spain is if this weekend's events reveal a palpable problem between German Chancellor Angela Merkel and French President Francois Hollande."It seems as though the market really wants to go up at this point," Day said. "Whatever happens over the weekend, Asia and Europe come first. If Europe reacts positively then U.S. could follow." The Dow Jones Industrial Average rose 3.6% to close the week at 12,554. It was the blue-chip index's best weekly performance of the year, and it's now up 2.8% in 2012. The S&P 500 increased 3.7% this week to 1326, and the Nasdaq Composite gained 4% to 2858. Year to date, the indices are up 5.4% and 9.7%, respectively. Brian Gendreau, market strategist for Cetera Financial Group, also anticipates Wall Street's focus will remain on Europe and China even though the coming week will be "a big data week." > > Bull or Bear? Vote in Our Poll Potential positives for the market, according to Gendreau, would be a move toward a "European-wide bank deposit agreement" or any hints that more easing is on the way. He sees the prospect of a bailout for Spain as a mixed bag that could ultimately send stocks higher. "[I]t's kind of like having a fire truck outside your house," he said. "The good news is the fire truck's there, but the bad news is your house is on fire." While some analysts are expecting more volatility ahead for stocks, Gendreau anticipates the major U.S. equity indices will be "relatively range-bound" through the elections in Greece and possibly even the U.S. presidential elections.
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