New York - High anxiety on Wall Street won't subside this week as the deepening credit crunch pushes the global economy into recession, and corporate profits increasingly become an afterthought as investors scramble to raise enough cash to weather the credit crisis.
On the heels of a panic-riddled sell-off that caused the Dow industrials and the S&P 500 to plummet for eight days in a row, finance ministers and central bankers from the Group of Seven met on Friday - followed by meetings of the Group of 20, International Monetary Fund, World Bank officials and European leaders over the weekend - to discuss jammed credit markets and the staggering global economy.
While corporate earnings season gets into full swing this week, results will likely be on the back burner as investors struggle to see through the fog of fear that has engulfed the market.
Among financial institutions, JPMorgan Chase & Co, Citigroup and Capital One Financial Corp are all expected to release results.
Investors also will get a reading on September inflation with the US producer price index on Wednesday and the consumer price index on Thursday. September housing starts will be released on Friday.
But concerns that credit markets have not limbered up, despite a spate of moves to free up money from the Federal Reserve and other central banks, will remain the chief focus for market watchers.
"Normally, I would say we are entering earnings season. But this is purely an emotion-driven market," said Owen Fitzpatrick, head of the US equity group at Deutsche Bank Private Wealth Management in New York.
"It's one where people are trying to raise as much liquidity as possible, and I am getting the sense that the severity of the reaction of the past few days tells you that maybe we are getting relatively close to raising enough capital."
On Friday evening, Treasury Secretary Henry Paulson said the United States was planning to buy equity stakes in financial institutions to help recapitalise banks.
Worst week ever for S&P 500
Last week's coordinated interest-rate cuts from global central banks, including the Fed, failed to put an end to the nosedive in stocks as investor confidence remained severely strained.
It was the worst week on record for the Standard & Poor's 500 Index, which closed on Friday below the 900 level for the first time in 5-1/2 years. At Friday's closing bell, both the Dow Jones industrial average and the S&P 500 were down 18.2% for the week, while the Nasdaq Composite Index was down 15.3%.
Since the beginning of October alone, all three major indexes have skidded more than 20%.
Analysts said they were hoping to see a coordinated move come out of the G7 to ease the cost for banks to borrow overnight dollars from, or among, each other.
"There's some talk that the coordinated central banks of the G7 will look to basically insure interbank deposits," said Marc Pado, US market strategist at Cantor Fitzgerald & Co, in San Francisco.
"So that would drive Libor down and basically tell the banks, 'Look, do your normal business, if anything goes wrong, we'll pay for it.'"
But a G7 official said on Friday afternoon that the group of major nations was unlikely to adopt Britain's proposal to guarantee lending between banks.
The G7, which is made up of the world's richest nations, vowed on Friday to take all necessary steps to unfreeze credit markets and ensure banks could raise money, but they offered no collective course of action to avert a deep global recession, according to a brief communique released on Friday evening.
While the IMF over the weekend backed the G7 plan, it said concern about US and European financial institutions had "pushed the global financial system to the brink of systemic meltdown."
Analysts noted that markets have slumped to oversold territory. And while stocks might see a reflex bounce-back, a significant rally is unlikely to be sustainable as long as fear continues to rule.
"There's blood in the water and the sharks are circling," said Kurt Brunner, portfolio manager at Swarthmore Group in Philadelphia.
"But this constant selling, you would think, has to ease at some point," Brunner added.
Tech sector in spotlight
Along with financials, the tech sector will be in the earnings spotlight, with Intel, Google and eBay set to post results. Last week, IBM released better-than-expected preliminary results, which gave investors reason to feel some optimism about the resiliency of tech companies.
On Monday, the US Treasury bond market will be closed for the Columbus Day holiday. But the stock market will be open.
Among the week's major economic indicators, September PPI and retail sales are due on Wednesday, while the CPI and the Philadelphia Fed's October business index are set for Thursday. Investors also will look for the NAHB housing market index on Thursday, as well as the Federal Reserve's report on September industrial output and capacity utilisation.
On Wednesday afternoon, the Fed will release its "beige book" of anecdotal reports on regional economic conditions.
On Friday, the Reuters/University of Michigan Surveys of Consumers will give a preliminary reading for October on US consumer sentiment.
- AFP