Wall Street: All eyes on the banks
The Dow and S&P 500 are hovering near 1997 levels as investors look for reassurance that banks can stay afloat and the stimulus plan will work.
NEW YORK (CNNMoney.com) -- All eyes will be on Washington and the banking system this week, right where they've been for months.
The market is likely to take its cue this week from the government and the direction of financial stocks. Reports -- expected to be bearish -- on housing, manufacturing, employment and GDP growth will also be of interest.
Bank stocks and the broader market have been tumbling for the last two weeks, since the U.S. Treasury unveiled a bank bailout plan that was short on specifics. Questions about the ability of the banks to stay afloat amid the 14-month-old and counting recession are what is "overhanging the markets right now, more than anything else," said Timothy Ghriskey, chief investment strategist at Solaris Asset Management.
Worries that the government will have to nationalize, or take over struggling banks pummeled stocks last week. At the same time, investors have grown increasingly worried that Washington's other rescue plans won't be able to slow the recession.
While the Dow and S&P 500 managed to crawl back from nearly 11-year lows Friday, the mood on Wall Street hasn't improved.
"Washington has become the financial capital of America and that does not make investors happy," said Kim Caughey, senior equity analyst at Fort Pitt Capital Group.
Last week, President Obama signed into law the $787 billion economic stimulus package and also announced a $75 billion home loan modification plan. But investors, perhaps suffering from bailout fatigue, showed little reaction.
In addition to the economic reports, the week ahead brings testimony from Federal Reserve Chairman Ben Bernanke, a congressional address from President Barack Obama and House hearings on the various rescue plans that the government has put in place. More specifics regarding the plans would go a long way toward soothing Wall Street's worries.
Tuesday: The S&P/CaseShiller Home Price index, due before the market open, is expected to have fallen at a record 18.25% annual pace in December, according to a consensus of economists surveyed by Briefing.com. The index tracks home prices in 20 major metropolitan areas.
Also Tuesday, the Conference Board's February Consumer Confidence index is expected to have fallen to 36.0 from 37.7 in January. That reading would be the lowest since the Conference Board began tracking the index in 1967.
Wednesday: January existing home sales are due to be released shortly after the start of trading. Sales are expected to have risen to a 4.81 million unit rate from a 4.74 million unit rate in December.
Thursday: January new home sales are expected after the market open. Sales are forecast to have dipped to a 329,000 annual unit rate from a 331,000 annual unit rate in December.
January durable goods orders are expected to have fallen 2.3% after falling 2.6% in December. The weekly jobless claims report is also due Thursday.
Friday: Fourth-quarter gross domestic product growth (GDP) is expected to have been revised lower. GDP likely fell at an annual rate of 5.4% versus the initially reported decline of 3.8%.
The Chicago PMI, a regional read on manufacturing, is due after the market open. The index is expected to have risen to 34 in February from 33.3 in January. Any figure below 50 signals weakness in the sector.
Tuesday morning: Home Depot (HD, Fortune 500) is expected to have earned 15 cents per share versus 40 cents a year ago. Target (TGT, Fortune 500) is expected to have earned 83 cents versus $1.23 a year ago.
Thursday evening: Dell (DELL, Fortune 500) is expected to have earned 27 cents per share versus 31 cents a year ago. Gap is expected to have earned 32 cents versus 35 cents a year ago.
Tuesday: President Obama addresses the joint session of Congress.
Also Tuesday, there are House Financial Services subcommittee hearings on the home loan modification program and oversight of the bank bailout.
Tuesday and Wednesday: Federal Reserve Chairman Ben Bernanke gives his semi-annual testimony before Congress regarding monetary policy. On Tuesday, he speaks at a Senate Banking Committee hearing and on Wednesday at a House Financial Services Committee hearing. 
