Stocks to Remain Tentative

Stocks will continue to fret about economic growth and the Greek drama as June comes to an end this week. On the economic front, the most important report this week will be the June ISM Manufacturing report on Friday, though there are a number of housing and confidence related reports on the docket as well. Next week brings the all-important June non-farm payroll report.

We are still almost three weeks away from the second-quarter earnings season and it may be quite a long three-week wait.

Sentiment on the Greek situation is expected to remain cautious ahead of the crucial vote in parliament on Thursday on the new austerity measures agreed upon between the Greek government and the EU/IMF. A positive vote will help get breathing room for Greece, though the issue will hardly go away. Given last week’s successful vote of confidence for the cabinet, the odds of getting the parliament’s approval appear quite high. But the austerity plan is immensely unpopular among Greek citizens and the outcome of the parliamentary vote is far from certain.

On the domestic economic front, while the overall readings are generally quite soft, the drop in oil prices offers a ray of hope. I would confess though that I am still scratching my follically-challenged head at last week’s IEA decision to release strategic petroleum stockpiles.

With the Fed’s QE2 program coming to an end this week and the odds of new fiscal stimulus out of Washington almost non-existent, we should probably disregard the conspiracy theories and take the oil move as nothing more than a back-door stimulus. After all, the recent downtrend in oil prices, which got a helpful nudge from the IEA move, is a net positive for consumers.

Uncertainty about the economic picture will continue to drive market sentiment as has been the case over the last few weeks. The June manufacturing report coming out this Friday and the labor market report next Friday have the potential lift that uncertainty.

Zacks Investment Research

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