The Dow Jones Industrial Average and the S&P 500 snapped a two-week losing streak, but the Nasdaq closed in negative territory for a third straight week weighed down by Apple (AAPL). It was a choppy five sessions dominated by bank and big tech earnings, mixed economic data, and fears of out-of-control Spanish bond yields. A string of market-moving events next week will offer critical insight into the state of the economy, here and abroad, and where the market is heading next.
France's Presidential Election on Sunday
France is the second-largest economy in the Eurozone, and the fifth-largest in the world. With 10% unemployment and an expected 0.5% growth rate, this Sunday's French presidential election could have major consequences for the Eurozone.
"That's going to cause a lot of issues in the market," says David Lutz, managing director at Stifel Nicolaus. "If a Sarkozy loss occurs, that could complicate a lot of the bailout packages for the Eurozone. It could complicate austerity packages, and we're starting to see some of this stress building up in the market."
Right now it's a 10-person field of contenders that the French will vote on over the weekend. It's expected to be narrowed down to incumbent Nicolas Sarkozy against Socialist party challenger Francois Hollande, who will square off in a deciding vote on May 6.
The impact of this being a tight election is already setting in. "Over the last week, we've watched French credit default swaps hit 200 basis points; the high stress point was 250 basis points, so investors are building up protection," he says.
Lutz believes over the next couple of weeks we'll see more and more stress over a possible Sarkozy loss. Watch the widening yield spread between French and German bonds as indication of stress building in the core of the Eurozone.
FOMC Policy Meeting and Bernanke Press Conference on Tuesday and Wednesday
The Federal Reserve begins a two-day policy meeting on Tuesday morning. The 12-member committee will haggle over inflation, growth, labor market activity, and possibly the role of quantitative easing in the economic recovery. The meeting ends Wednesday with a policy statement and economic projections announced around 1:00 pm ET, followed by Fed Chairman Ben Bernanke's quarterly press conference at 2:15 pm ET.
"We're going to be getting a lot of clarity, hopefully, from the FOMC, and the Street is going to be looking for more quantitative easing talk," says Lutz. "At the end of the day it's going to be a question of 'is the FOMC going to be leaning more and more dovish, or are they going to keep the hawkish stance that they've had of late?'"
Q1 GDP on Friday
The stance of the Fed hinges upon the strength of the economic recovery and whether they see sustainable improvement moving forward. A hugely telling piece of data comes on Friday morning with the release of the first snapshot of Q1 GDP.
General consensus believes the economic growth rate was 2.5% in the first quarter—which is slower than the previous quarter, but significantly higher than Q1 in 2011. Also keep in mind that this is the first look at GDP for the quarter. This number is subject to a second and third revision.
"The Fed is really concerned that some of these tailwinds that we have for our first quarter GDP numbers are transitory," says Lutz. "While the Fed is very happy with 2.5% GDP coming off of where we were, I don't think that's going to be enough to keep them going, especially when they see headwinds developing in the second and third quarter."
For more details on the slew of data coming out next week, check out the video above and the list below.
Key Market Moving Events Ahead:
First Round of French Presidential Election
FOMC Meeting Begins
S&P Case-Shiller Home Price Index
FHFA Home Price Index
New Home Sales
Richmond Fed Survey
Apple Earnings (after market close)
FOMC Policy Statement/Economic Projections
Fed Chairman Bernanke Press Conference
Pending Home Sales
KC Fed Survey
Consumer Sentiment (final)