NEW YORK (REUTERS) - United States (US) stock investors will take their cues this week from March jobs data and diplomacy to defuse East-West tensions over Russia's annexation of Ukraine's Crimea region.
Friday's monthly jobs report, the most widely watched US economic indicator, is expected to show that employers added 200,000 jobs in March to non-farm payrolls, according to a Reuters poll of economists. If the March jobs figure is strong, that could convince stock investors that the US economy's recent setbacks related to the weather were only temporary.
The rebound in hiring started last month despite the icy weather. Employers added 175,000 jobs to non-farm payrolls in February after creating 129,000 new positions in January.
"We potentially could have a big positive surprise. The polar vortex is over, and I believe we could get a snapback in payroll numbers that is significantly better than expected," said Mr Doug Cote, chief market strategist at ING US Investment Management in New York.
Job growth would be a plus for the market, which has suffered a bout of volatility as some of the most high-flying shares, including biotechs, tumbled in the past week.
WATCHING RUSSIA AND UKRAINE
When trading begins on Monday, investors will keep an eye on developments involving Russia and Ukraine. Over the weekend, the the Ukraine crisis prompted the US to send its top general in Europe back to the Continent early from a trip to Washington due. On Sunday, the Pentagon called the move a prudent step, given Russia's "lack of transparency" about troop movements across the border with Ukraine.
The Pentagon made the announcement as US Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov met in Paris to work out the framework of a deal to reduce tensions over Russia's annexation of the Crimea region in Ukraine.
A FULL MENU OF ECONOMIC DATA
Wall Street will get more data on the broader economy this week as well.
The Institute for Supply Management will release its national surveys for March on the manufacturing and services sectors, on Tuesday and Thursday respectively. The indexes are expected to show improvement from the previous month as well.
Rosier data could confirm for investors that recent weakness in economic data was caused by the winter's harsh weather, suggesting the US economy's uptrend is intact.
Improvement in the labour market, along with a pickup in the manufacturing and services sectors, could also bolster the case for the Federal Reserve's scaling back of economic stimulus and put more focus on the timing of when the central bank will begin raising interest rates.
Car sales for March will be released this week, along with ADP's private-sector payrolls report for March and data on the US international trade deficit for February.
Investors will be anxious to get a look at more trade data after China's weak export numbers earlier this month underscored worries that the world's second-largest economy is slowing.
TECHS MAY EXTEND SLIDE
The recent sell-off in biotech and other recent big gainers could persist, strategists said, although so far it has not eroded the market's bull run. Investors have been putting money instead into utilities and other sectors.
The Nasdaq biotechnology index fell 7 per cent for the week. With just one trading day left in March, the Nasdaq biotech index was down about 13 per cent for the month at Friday's close.
"There's definitely been rotation out of tech in terms of asset flows, and energy and utilities have been growing," said Mr John Kosar, director of research with Asbury Research in Chicago.
For the past week, the S&P utilities sector index rose 1.2 per cent and the S&P energy index climbed 2.5 per cent.
FIRST-QUARTER WARNINGS DOMINATE
More US companies could issue outlooks for the coming reporting period in the week ahead. So far, negative outlooks have surpassed positive ones from S&P 500 companies by a ratio of 6.9 to 1 for the first quarter, Thomson Reuters data showed.
That is still lower than the ratio for the fourth quarter, but the high number of negative outlooks has driven profit estimates down for the first quarter.
S&P 500 first-quarter earnings growth is now expected to increase just 2.1 per cent, down sharply from a Jan 1 growth estimate of 7.6 per cent, the Thomson Reuters data showed.
Among companies that have already reported earnings, FedEx said severe winter weather hurt results. FedEx cut its fiscal-year profit forecast.
Monsanto is due to report earnings this week, along with Micron Technology. But the earnings season will not get under way until April 8, when Alcoa is scheduled to report results.
"You'll start to have companies giving you an indication of how the quarter looked," said Mr Dan Veru, chief investment officer of Palisade Capital Management LLC in Fort Lee, New Jersey, which oversees US$4 billion (S$5 billion).