Bruised and battered at the start of 2009, Wall Street looks ahead to the inauguration of Barack Obama as president with hopes the new administration can tackle the global economic crisis.
The markets, which open trade on inauguration day on Tuesday after the Martin Luther King holiday on Monday, will see a light week for economic data but potentially market-moving earnings.
The earnings reports will be the latest to show the horrific impact of the economic slump on the health of the corporate sector, but the change at the White House will be the focal point, say analysts.
“The economic data will take a rare back seat early next week, as eyes turn to the political sea change stateside,” said Peter Buchanan, economist at CIBC World Markets.
“Obama’s inauguration comes at a time of renewed conviction that governments must incur sizeable fiscal deficits for the time being, to get the world’s troubled economies moving again.”
Some say the mere fact of change at the White House will be positive.
“No matter how one feels about President [George] Bush, most Americans are pleased to see him go and Obama to arrive,” said Al Goldman, chief market strategist at Wachovia Securities. “This could provide an emotional uplift.”
The market will be eager for any news to help lift it out of its funk, following a rocky week.
Stocks were roiled by news of dismal retail sales, more heavy losses in the banking sector and price declines that suggest a potentially dangerous period of deflation.
In the week to Friday, the Dow Jones Industrial Average slid 8,34% to end at 8 281,22.
The technology-heavy Nasdaq shed 2,69% to 1 529,33 over the week and the broad-market Standard & Poor’s 500 dropped 4,52% to 850,12.
While Obama’s inauguration as 44th president may lift spirits, some analysts argue that it will do little in the near-term to help the market or the economy.
“The inauguration is coming up soon and it can’t come soon enough for those who believe that once we change administrations, pump in a few dollars through a stimulus package, poof, all our problems will go away,” said Kevin Giddis, analyst at Morgan Keegan.
“Wake up, Alice. Wonderland is the other direction.”
But Joel Naroff at Naroff Economic Advisers said the nation’s economic woes are at least in part because of depressed sentiment among both consumers and businesses, which could get a lift from a change at the White House.
“I believe confidence is a critical factor in turning the panic and depression around,” said Naroff.
In the upcoming week, the Obama inauguration will be the key as markets will look to how the new president addresses the economic challenges.
“This historic inauguration will launch a major new direction in the conduct of executive policy on both domestic and international issues,” said Nigel Gault and Brian Bethune, economists at IHS Global Insight, in a research note.
“Given the gravity of the domestic economic crisis — and the global recession — the inaugural takes on a symbolic importance on aspirations for the future not seen since the inauguration of Ronald Reagan in 1981.”
Also on tap will be earnings reports from key firms including Microsoft, Google and General Electric, which should highlight the challenges facing key companies. — AFP