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Europe's Festering Debt Problems Weigh on Markets


This week's busy economic calendar should help answer some questions about U.S. growth, following a spate of recent soft readings. Until then, stocks remain under pressure as negative ratings agency actions remind investors of Europe's debt woes.

With nothing major on the U.S. economic calendar, stocks will likely remain under pressure this week as negative rating agency actions have brought back Europe's festering debt problems to the front burner all over again.

In addition to lingering fears of Greek restructuring, Spain is in the news after the ruling party performed badly in regional elections, raising doubts on its ability to implement the tough austerity measures needed to ward off the need for a bailout. Renewed European concerns come at a time of growing anxieties about the U.S. growth picture.

We know how this plays out in the markets: the greenback strengthens at the expense of the common currency, pulling down commodities and stocks with it.

This week's busy economic calendar should help answer some of the questions that have cropped up about U.S. growth following a spate of recent soft readings. A strong durable goods report on Wednesday will help offset the decelerating momentum we saw in last week's industrial production and regional manufacturing surveys.

We will also get another look at the first-quarter gross domestic product numbers on Thursday, originally reported at 1.8%, which will likely get revised upwards. Also important will be the weekly jobless claims report on Thursday, where we want to see the recent downtrend towards the 400,000 level remain in place. 

The earnings season is effectively over, with only a handful of reports left. Sony Corp. (NYSE: SNE) announced a bigger than expected loss, driven largely by Japan's natural disaster. Campbell Soup Co. (NYSE: CPB) beat earnings per share and matched top-line expectations.

With nothing else going on Monday, stocks will be reflecting the negative developments in Europe and the ongoing domestic growth debate. With none of these issues expected to be resolved soon, stocks will likely reflect this discourse through the summer months.

Sheraz Mian is the Director of Research at Zacks Investment Research where he relies on valuable data to assess winning stocks and funds. Now, you can access the same data free for 30 days just by trying Zacks Premium.

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