“Change is the law of life. And those who look only to the past or present are certain to miss the future.” — J.F. Kennedy

1. S&P cuts U.S. rating outlook to negative — Standard & Poor’s cut its ratings outlook on the U.S. to negative from stable, sending a lightning bolt through the deficit-reduction debate in Washington and sending stock markets sharply lower.
2. Finnish election results threaten EU bailouts — Finnish voters have ousted their government and handed major gains to the True Finns anti-bailout party, placing a major doubt on Europe’s rescue funds for debt-ridden countries.
3. Bearish Sentiment Up for the Second Week in a Row — according the the latest poll by AAII, courtesy of the Bespoke Investment Group, bearish sentiment from Investors Intelligence rose for the second week in a row. At a level of 19.2%, however, current levels remain low by historical standards.

The week ahead — Economic data from Econoday.com:

“While markets often make double bottoms, three pushes to a high is the most common topping pattern.” — J. Bollinger

1. Mortgage servicers to pay foreclosure victims — the 14 largest mortgage servicers have come to an agreement with banking regulators and other authorities to pay back homeowners for losses they suffered from foreclosures or loans that were mishandled following the housing collapse. Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) are among the servicers affected.
2. Senate probe alleges Goldman mortgage deception — A Senate subcommittee has accused Goldman Sachs of selling poor quality mortgage securities it bet against and is pushing the Justice Department to investigate Goldman CEO Lloyd Blankfein’s testimony before Congress.
3. China GDP +9.7%, CPI +5.4% — Chinese inflation continued to strengthen in March as CPI accelerated to 5.4%, above expectations and the fastest pace since 2008. Q1 2011 GDP also beat forecasts in rising 9.7%, but this was slower than the 9.8% recorded for Q4 2010.
4. SEC close to deal with banks over role in crisis — the SEC is in negotiations with JPMorgan Chase (JPM) and other major banks to settle fraud allegations related to mortgage-bond deals that helped cause the financial crisis, according to officials.
5. Moody’s cuts Ireland’s ratings to Baa3 — Moody’s has cut Ireland’s sovereign rating by two notches to Baa3 and maintained a negative outlook.
6. Congress passes ‘$38B’ budget deal — the House and the Senate yesterday approved a $38B budget deal for the rest of the fiscal year. The House passed the bill by 260-167 and the Senate by 81-19.

The week ahead — Economic data from Econoday.com:

“In investing, the return you want should depend on whether you want to eat well or sleep well” — J Kenfield Morley

1. Moody’s downgrades Portugal on bailout fears — Moody’s cut Portugal’s rating by one notch to Baa1 from A3 and put the rating on review for a possible further cut. The move comes after Moody’s cut Portugal’s rating by two notches last month.
2. China Raises Interest Rates to Counter Inflation Pressure — China raised interest rates for the fourth time since the end of the global financial crisis to restrain inflation and limit the risk of asset bubbles in the fastest-growing major economy. The benchmark one-year lending rate will increase to 6.31 percent from 6.06 percent
3. European Central Bank hikes rates — The European Central Bank delivered its first rate hike to 1.25% from 1% since 2008 despite the euro zone’s newest debt woes in a bid to prevent rising inflation pressures from becoming entrenched.
4. Portugal seeks bailout, Europe debt crisis spreads — Portugal asked for a bailout to relieve its crushing debt, joining Greece and Ireland by becoming the third eurozone nation to seek outside help amid a bruising financial crisis.
5. Market Breadth Indicator shows short-term overbought — The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

6. Investor Fear Gauge — The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge”. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

The week ahead — Economic data from Econoday.com:

“Don’t confuse brains with a bull market” — Humphrey B. Neill (Investor)

1. Toyota restarts some Japan production — Toyota (TM) has resumed production at plants in Japan for the first time since the earthquake and tsunami brought manufacturing in the country to a complete halt. The carmaker began output at two factories that make three hybrid models and will gradually expand domestic production as its supply of parts recovers.
2. Japan mulls special tax for quake relief — The Japanese government is considering a special tax to help finance relief and recovery efforts in earthquake- and tsunami-hit Japan, according to a published report last Thursday.
3. G-8 to discuss nuclear safety — The Group of Eight industrialized countries will discuss nuclear safety and global safety standards for the industry at its next meeting in May.
4. Fed names banks that took emergency loans — the Fed identified the banks that utilized its discount window during the height of the financial crisis, with U.S. Bancorp (USB), Wachovia (now part of WFC), Morgan Stanley (MS) and several European banks among the largest users. U.S. Bancorp borrowed $3.35B on Sept. 10, 2008, Wachovia borrowed $29B on Oct. 6, Morgan Stanley borrowed over $3B on Oct. 9, and Washington Mutual took out a $2B loan on the day before it collapsed and another $2B the next day. On October 29, when lending peaked at $111B, Belgium’s Dexia took $26.5B and Germany’s Depfa $24.6B. Arab Banking Corp., which was then 29% part-owned by Libya, took 73 loans in an 18-month period, borrowing an aggregate of $35B.
5. Ireland to give banks another €24B — Ireland will pump another €24B ($34B) into its crippled banking sector as it again attempts to bring its three-year financial crisis to an end. The cash will come from Ireland’s emergency EU-IMF credit line and adds to €46.3B that the state has already pumped in. The government, which now controls almost the entire industry, intends to consolidate its holdings into two “pillar banks” based on market leaders Bank of Ireland (IRE) and Allied Irish Banks (AIB).
6. China’s factory-activity gains slow — HSBC’s privately compiled purchasing managers index rose to 51.8, falling below the long-run series average of 52.3, but up from February’s 51.7. Meanwhile, the government’s official PMI by the China Federation of Logistics & Purchasing rose to 53.4 in March, up from a reading of 52.2 in the previous month. However, this result was below a 54 forecast, according to a Reuters survey.
7. Plunge in 10 ETFs triggers “flash crash” memories — Nasdaq OMX Group Inc said it canceled trades in 10 new ETFs sponsored by Scottrade affiliate FocusShares, some of which briefly plummeted as much as 98 percent.
8. 2011 Q1 Performance — courtesy from the Bespoke Invest Group, below is the chart that shows key ETFs performance in Q1.

The week ahead — Economic data from Econoday.com: