Budget deal accepted, NYSE bid rejected and British banks relocated? The markets mostly shrugged off the effects of a government shutdown last week. Now, the focus turns to the beginning of earnings season. Here's what we're watching…
1. The Great Budget Debate: After Friday evening's eleventh hour deal cut $38.5 billion in fiscal year spending, "nonessential" government workers across the country will be saved the indignity of spending Monday at home. Last week's deal notwithstanding, the scene is now set for the larger partisan debate over long-term measures to address the deficit. President Obama is poised to make a major speech this week to lay out his plan. Oh, and as matters of federal spending go, we do have the small matter of the debt ceiling on the immediate horizon. The debt ceiling, you ask? We're currently on pace to hit it by May 31 and the very real consequences of sovereign default will be at stake in this political game of chicken.
2. NYSE Says "Auf Wiedersehen": NYSE Euronext's board of directors rejected the $11.3 billion joint bid from Nasdaq OMX Group and Intercontinental Exchange Sunday, favoring the alternative bid from Germany's Deutsche Boerse. It is unclear how the spurned suitors will respond Monday morning, but the matter is far from resolved. What is certain is that the market exchange landscape is set to fundamentally change.
3. Raj Plays Defense: How will Raj Rajaratnam defend himself against all those wiretapped phone calls the government has been playing for the jury? We find out Monday, as the defense begins its case. Rajaratnam claims he traded not on illicit tips but on publicly available information. The defense plans to call just five witnesses and closing arguments could be upon us in midweek.
4. With or Without You: The results of Britain's banking review will be released Monday and the whisper is that the report will spell bad news for UK banks, potentially leading some of the major players to seek greener pastures. Barclays to New York? HSBC and Standard Chartered to Asia? The rumors are rampant.
5. Earnings Season! You can almost hear the drumroll now. After the market close Monday, Dow component Alcoa reports earnings numbers, kicking off the frenzy that is earnings season. Big names like Intel, Google,JPMorgan Chase and Bank of America are on the docket this week, but let's not get ahead of ourselves. Analysts are looking for Alcoa to deliver a strong quarter of $0.27 a share on elevated demand. The big question is whether rising aluminum prices will benefit the company more than higher input costs have hurt Alcoa.