Markets: Shaky after the slump

Wall Street avoided a bigger walloping late last week, with sellers finally calling it quits after a nearly 10% plunge in less than three weeks. But the week ahead could be pivotal as investors either jump back in - or retreat even further.

The week ahead brings quarterly earnings from consumer companies Walt Disney and Coca-Cola, as well as economic reports on retail sales, inventories, employment and consumer sentiment.


Appropriately it overreacted not as urgently as it should have or View results Debt fears in focus: Worries that Greece will default on its debt, causing a domino effect in other debt-strapped European nations, pummeled U.S. stocks last week. Investors ditched risk and embraced the U.S. dollar and government debt as they worried that a U.S. economic recovery is too fragile to withstand an upheaval across the Atlantic.

But the declines followed weakness in late January, all of which set the S&P 500, Dow and Nasdaq close to 10% below rally highs hit late last month. A 10% selloff is technically a correction, and investors managed to slow and then stop the selling before the market hit such levels late Friday.

"You've clearly got some negative sentiment and legitimate concerns," said Phil Orlando, chief equity market strategist at Federated Investors. "But that doesn't mean the market should be down 10% and continue falling. If we are able to traverse the concerns, we can return the focus to fundamentals, which are starting to improve."

He pointed to the batch of better-than-expected fourth-quarter earnings and some of the recent reports that show the economy is continuing to stabilize, although the job market remains battered.

The challenge is going from an economic recovery that is largely stimulus driven to one that is driven by fundamentals, said Robert Siewert, portfolio manager at Glenmede. "People are questioning the fundamentals."

He said that the issue going forward is "how sustainable corporate earnings and GDP are going to be when we haven't yet seen a fundamental improvement and when we still see systemic problems overseas."

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