Washington's bid to put finishing touches on healthcare reform this weekend should help lift uncertainty on Wall Street, but there may be some turbulence along the way this week as the recent rally appears to be fraying.
Democratic leaders in the House of Representatives pushed undecided members for support and voiced growing confidence on Friday they will win a close vote on final passage of a bill that requires a sweeping overhaul of the country's healthcare system.
The House will vote on Sunday afternoon on President Barack Obama's top domestic priority, which has picked up momentum in recent days with backing from former opponents.
Shares of healthcare insurers, who have been criticized by Obama in recent weeks, could extend their rally if the vote helps remove the uncertainty about their profit outlook, analysts say.
The market doesn't like indecision. Whichever way it goes, there will be a decision and then people can move on, said Neil Catania, a floor broker at MND Partners in New York.
If the bill passes, you'll have a majority of people putting some money to work. It's a mixed bag, though, because what's good on one side is going to hurt another side. But more important than anything is the decision.
The Morgan Stanley Healthcare Payor Index <.HMO> capped its biggest five-day run-up in three months on Friday as investors bet that their prospects might end up not being as adversely affected as previously feared.
But improving sentiment over healthcare might not be enough to overcome anxiety that is now buffeting the market as investors look for new catalysts to push ahead a year-long rally in U.S. stocks.
PICTURE WINDOW ON THE ECONOMY
In the coming week, housing will be another dominant theme with the release of February existing home sales on Tuesday and a report on February new home sales on Wednesday.
Investors will pay close attention to home sales because the housing sector is still struggling with a tide of foreclosures after the subprime mortgage crisis that surfaced in 2007 and helped push the economy into one of the worst recessions since the 1930s. A stronger housing market is deemed crucial to the economy's health.
On Friday, the focus will turn to the government's final reading on fourth-quarter gross domestic product and the final word on March consumer sentiment from the Reuters/University of Michigan surveys.
Investors will be hard pressed to see if the reports offer more evidence that the economic recovery continues to gain traction. For a full economic diary, see
Just given the moves we've seen over the past month, a very rapid ascent, I think the market will probably welcome a period of time where we might be able to digest some of this data going forward, said Christian Hviid, chief market strategist at Genworth Financial Asset Management in Encino, California. That probably argues for a more sideways move in the market.
The Dow Jones industrial average <.DJI> and the benchmark Standard & Poor's 500 Index <.SPX> are pushing against levels last seen in October 2009, having rebounded from a mid-January sell-off that took the S&P 500 down as much as 8.1 percent through early February from the 15-month peak of January 19.
The S&P 500 is up 71 percent from the March 2009 bottom. It registered its biggest percentage drop in almost a month, falling 0.51 percent to 1,159.90 in Friday's session, but it still managed to score a 0.9 percent gain for the week. The Dow industrials climbed 1.1 percent for the week, while the Nasdaq added 0.3 percent.
POWER BREAKFAST AT TIFFANY'S
Although the first-quarter earnings period is still weeks away, a few companies are due to report this week. The calendar includes technology bellwether Oracle Corp
Jeweler Tiffany & Co
Quarterly scorecards are due on Tuesday from KB Home
Other noteworthy names on the earnings scoreboard are: Lennar Corp
MORE GREEK DRAMA
Besides focusing on healthcare and the macro-economic outlook, investors will also wrestle with Greece's fiscal debacle, which has the European Union scrambling to come up with more reassuring proposals on how to come to Athens' aid.
European Union President Jose Manuel Barroso urged EU member states on Friday to approve a standby aid package for Greece as he sought to take the initiative in dealing with Athens' debt crisis.
EU leaders will discuss the issue at a summit in Brussels next week on Thursday and Friday after Greece said it could not deliver promised deficit cuts if its borrowing costs remained high. It said it may have seek help from the International Monetary Fund.
It looks like the Greek crisis is now going into extra innings, said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey. Because of this uncertainty between support from the EU or from the IMF and having a disagreement between France and Germany, this is going to drag the saga out a little longer.
(Reporting by Ellis Mnyandu, with additional reporting by Leah Schnurr; Editing by Jan Paschal)