Europe Remains a Concern This Week - TheStreet

Updated from 02/13/10

Update includes Japan's report of better-than-expected fourth-quarter GDP and eurozone finance ministers' statements about Greece.

NEW YORK (

TheStreet

) -- Investors will remain wary of troublesome European sovereign debt issues this week, but a sprinkling of economic data and earnings news may also refocus some of the market's attention on domestic affairs.

U.S. markets were closed Monday for Presidents Day. But investors will start anew Tuesday, with one eye on a bevy of domestic economic figures and earnings headlines. Still, most agree uncertainty about the debt problems in Greece, Portugal, Spain and Ireland are the wild card that could overshadow everything.

Stocks ebbed and flowed last week, after European Union leaders proclaimed their hazy commitment to Greece and outlets reported Germany may aid the Mediterranean nation with loan guarantees.

On Monday, European stocks closed slightly higher, although volume was light. Eurozone finance ministers meeting in Brussels told Greece it needed to get ready for even tighter spending cuts and more taxes if its current deficit-reduction efforts proved insufficient.

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Concerns have already spread well beyond Greece. Fears of mounting debt loads throughout Europe accelerated Friday after statistics showed fourth-quarter gross domestic product in the eurozone grew by a paltry 0.1% pace.

"It's not so much about Greece, because everyone knows it's a little guy," said Linda Duessel, equity market strategist at Federated Investors. "It's more about the systemic concerns coming out of that. The EU minister saying it's contained reminds us of when Bernanke said the subprime loan crisis was contained. So, does Greece lead Portugal and Spain down, and more importantly, will it cause a seizing up of the credit markets? I don't know how all of that plays out. It's going to play out, but no one knows for sure how."

Concerns about global economic growth were fueled even more Friday, after China raised its bank reserve ratio requirement on inflation fears. China's markets are closed this week for the Lunar New Year.

Over the long weekend, however, there was good news on the economic front from Japan, which reported

better-than-expected fourth-quarter GDP

.

The Dow finished lower Friday, but the tech-heavy Nasdaq closed just higher, amid the global concerns. Despite the stock swings, the blue-chip average managed a 0.9% gain for the week.

But as investors keep tabs on Europe this week, a swarm of economic reports will also come due. Government readings on inflation at the producer level and consumer level are set for release on Thursday and Friday, respectively. Manufacturing figures, weekly jobless claims numbers and Treasury budget stats will show, as well.

Paul Nolte, managing director at Dearborn Partners, says the shakeout overseas is his primary concern for the week. Next to that, he'll scour U.S. housing stats looking for larger clues about consumers' well-being. The NAHB/Wells Fargo Housing Market Index, a measure of builder confidence, will come Tuesday. Separately, January housing start figures due Wednesday will probably show an uptick to a seasonally adjusted annual pace of 580,000 units, after dropping 4% to 557,000 in December.

"Housing is going to be a driver for the economy and another indicator of how the overall consumer is doing," Nolte said. "If housing prices and housing issues are still with us in a big way, it's going to spell big continued problems for the consumer. If you look at your house and say 'I'm not getting any further ahead, it's not getting any better,' you're not going to go out and spend. You're also not going to be able to turn over your place, which also spurs a fair amount of spending."

Steady output gains have analysts thinking that factory production and capacity utilization marks improved last month. The

Federal Reserve

reports those figures on Wednesday, which may bode well for the unsteady labor market. Jack Ablin, chief investment officer at Harris Private Bank, says he's studied a very clear link between industrial production and job growth.

"If we can grow at a 3%

annualized rate in industrial production, that tends to create about 175,000 jobs per month," he said. "That would get us to a point where we could lower our unemployment rate. We need to grow at about 2% just to tread water on unemployment."

And job growth will undoubtedly remain a talking point among lawmakers this week. Senate Majority Leader Harry Reid (D., Nev.) announced plans Thursday to pare down the Senate's jobs bill to a few decisive provisions, jettisoning a more expensive package that had garnered some support from both sides of the aisle. The slimmed-down bill is now expected to cost $15 billion, down from about $85 billion, and will attract debate in the days ahead.

The Fed will also release minutes from its January meeting of the Federal Open Market Committee on Wednesday. Though the

FOMC signaled its stance to keep rates low for "an extended period," Fed watchers may try to pick apart Kansas City Fed President Thomas Hoenig's opposition to use of that language.

Earnings season is near an end, but a few reports will continue to garner attention. Dow components

Kraft

(KFT)

and

Merck

(MRK) - Get Report

will report before Tuesday's opening bell.

Whole Foods

(WFMI)

will join them after the close.

In technology, investors will get two pronounced readings on PC sales, with

Hewlett-Packard

(HPQ) - Get Report

reporting Wednesday and

Dell

(DELL) - Get Report

reporting Thursday.

Wal-Mart

(WMT) - Get Report

, the world's biggest retailer, will unveil holiday sales results in its fourth-quarter release due Thursday morning.

A collection of natural gas firms will report this week as well, including

Devon Energy

(DVN) - Get Report

,

XTO Energy

(XTO)

,

Chesapeake Energy

(CHK) - Get Report

and

Apache

(APA) - Get Report

.

-- Written by Sung Moss in New York