The Eurogroup acceptance of a bailout extension for Greece sent both the Dow Jones Industrial Average and S&P 500 to new record highs on Friday with the Nasdaq 100 pushing further towards its peak last reached in the year 2000.
To begin the week, US stocks are expected to pullback at the open on Monday with a lack of major catalysts able to sustain the big moves from the previous week.
More action is expected on Tuesday when Fed Chair Janet Yellen testifies before the Senate Banking Committee. The latest statement from the Fed erred to the dovish side so the key will be whether that gets confirmed. Janet Yellen is likely to over-emphasise the data-dependency of the timing of the first rate-hike, perhaps with a hint that current projections would imply the timing being around mid-year.
Greece still has to submit a letter on Monday with details on the conditions it is willing to accept for the four-month extension to its bailout from its Eurozone creditors in terms of structural and economic reforms. There is still plenty of scope for further upset along the way as either side negotiates itself the best deal. Comments from finance ministers as to how quickly the agreement will be signed off should still move markets.
US equities largely outperformed those in Europe for the first three weeks of February, snapping back sharply from a downturn in January. Now that the situation in Greece is set to calm down for a few months while a longer term solution is reached, there is chance that Europe will again attract a bigger chunk of flows. More flows into Europe could leave US markets susceptible to lost upward momentum and perhaps even another downturn as was seen in January.
The European Central Bank’s upcoming €60bn monthly injection into European markets via its QE program should continue to be the driving force behind strength in European stocks.
The only economic data on the docket from the US is existing home sales in January which is expected to see a slight drop to 5.03M from 5.04 in December.
After its failed Bill Ackman-backed takeover of Allergan, Valeant Pharmaceuticals have agreed to acquire Salix Pharmaceuticals for $158 per share for a deal worth around $14.5bn.
Futures suggest the:
S&P 500 will open 6 points lower at 2,104 with the
Dow Jones expected to open 48 points lower at 18,092 and the
Nasdaq 100 7 points lower at 4,436.
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