After Wall Street's worst week of the year, U.S. stocks are facing more selling after elections in Europe swept aside leaders that had pursued strict budgetary reforms in the euro zone largely favored by investors.
S&P 500 futures fell Sunday evening after results from the Greek and French elections, with the market in line for a 1 percent fall at Monday's open.
Markets worldwide have closely watched developments in Europe, which has struggled with weak economic growth and high debt levels.
While the victory of Socialist candidate Francois Hollande in France's presidential elections had been expected, Greek voters trounced ruling parties, a surprise result that put the country's future in the euro zone at risk.
"The market is not happy with the elections. Investors believe this represents the first step toward (Greece) leaving the Union," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
A steady diet of austerity has reduced public spending and boosted unemployment in several European economies, particularly Greece. Euro zone growth was just 0.7 percent in the fourth quarter, and Britain recently fell back into recession.
In Greece, voters turned against the two major parties supporting the European Union/IMF program designed to keep Greece from bankruptcy. Hollande's victory over incumbent Nicolas Sarkozy in France will raise pressure on Germany to pursue a more growth-oriented approach to the crisis.
David Kotok, president of Cumberland Advisors in Sarasota, Florida, said the changes in Europe could make Japan and the United States, as well as Europe, more likely to take more measures to help growth through monetary policy.
"Once markets realize that the political winds are now accelerating toward more easing by the G4, markets will resume an upward bias," he said.
TECHNICALS RULE IN A LIGHT WEEK
Technical levels could regain importance this week as the U.S. economic data calendar thins and fewer than 30 of the S&P 500 components are expected to report earnings.
"We found support recently on the S&P near 1,360. If we violate that, it would be a bad sign," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.
The S&P 500 slipped below that level twice last month and bounced back, but has since found strong resistance at 1,400. The recent soft economic data, capped with Friday's payrolls report showing the third straight month in which hiring had slowed, has dampened hopes for a convincing break upward.
The data dragged the market lower. The S&P 500 and the Nasdaq Composite posted their worst weeks this year. For the week, the Dow Jones industrial average dropped 1.4 percent, the Standard & Poor's 500 Index slid 2.4 percent and the Nasdaq lost 3.7 percent.
The high points of this week's economic calendar will come on Friday, with the U.S. Producer Price Index for April and the preliminary reading for May on consumer sentiment from the Thomson Reuters/University of Michigan surveys.
In terms of earnings, the top names this week include Dow components Walt Disney Co, which reports on Tuesday, and Cisco Systems, due Wednesday.
Wednesday will also bring Macy's earnings report, followed Thursday by Kohl's, which will be dissected for clues on the mood of U.S. consumers.
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