Market outlook: Uneven meets ugly on Wall St

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  Source: Reuters

Federal Reserve Chairman Ben Bernanke sure has it right: the US economic recovery has been, is currently and will continue to be "uneven".

For investors, the equivalent word is simply: "ugly".

Wall Street is looking for a reason to stop falling, and the focus this week will be on a range of economic data.

But for those who place bets, a seventh down week for US equities would appear to be in the cards - it's always hard to bet against the trend. The key piece of the puzzle won't arrive for another two weeks - payrolls figures.

More than $US1 trillion has been erased from American equity markets since the Standard & Poor's 500's peak on April 29, Bloomberg reported.

The S&P 500's 6.8% slump since the end of April has cost the benchmark index the biggest rally in more than five decades.

The measure gained 102% between March 9, 2009, and April 29 of this year, the largest advance over the same period of time since 1955, according to Bloomberg. Now, it's up 88%, the most since 1999.

Last week, the Dow Jones Industrials Average fell 1.6%, the S&P 500 shed2.2% and the Nasdaq Composite Index dropped 3.3%.

"You have to be realistic. You've got to have some sort of correction to go into this marketplace just for the healthiness of the market," Cliff Draughn, president and chief investment officer at Excelsia Investment Advisors in Savannah, Georgia, told Reuters.

Among the US economic numbers on tap this week is producer prices, consumer prices, retail sales for May, leading indicators and two regional manufacturing surveys.

Despite the wave of pessimism about the US and global economies in the last six weeks, not everyone is throwing in the towel.

There remains hope that the second half of the calendar year will show that the outlook, at least in the US, isn't as bleak as it now appears.

Consumer spending in the US, which accounts for about 70% of the economy, will grow an average 2.95% in the second half of 2011 after rising 2.1% this quarter, according to the median forecast of economists polled by Bloomberg News from June 1 to June 8.

Economic growth will accelerate to a 3.2% rate from July through December from 2.3% this quarter, the survey showed.

JPMorgan Chase & Co.'s David Kelly and Liz Ann Sonders of Charles Schwab Corp. still expect profit growth and below-average valuations to bolster equities this year, Bloomberg Businessweek reports in its June 13 edition.

In his latest commentary, Bob Doll, who helps oversee $3.65 trillion at New York-based Black Rock Inc, the world's biggest money manager, said he's optimistic about the economic outlook, though the state of the labour market was key.

"The economic forecast will be largely dependent on the state of the jobs market. A significant acceleration or deceleration in the pace of jobs growth has the potential to change almost everything," Doll said.

Lots of bets are being placed on companies hiring more workers, not the least by Bernanke and President Barack Obama.

For now though investors are wary and with good reason.