NEW YORK (Reuters) – Stocks extended January’s rally on Wednesday after upbeat global manufacturing data boosted sentiment and as Greece neared a long-delayed deal with private creditors.

The recent run of better-than-expected economic data around the world, though still not suggesting a booming expansion, has helped lift equity markets as investors move away from a worst-case scenario for the global economy.

An index of the U.S. manufacturing sector rose in January to its highest level since June, an industry group said, while China’s factory sector expanded slightly, confounding expectations for a contraction. Germany recorded its first rise in manufacturing output in four months.

“The numbers aren’t horrible, the trend continues that the news is OK,” said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. “I think we’re going to grind higher.”

Optimism spurred gains in industrials, financials and basic materials, which rose between 1.1 percent and 1.7 percent. Caterpillar Inc (CAT.N), a company heavily exposed to global industry, rose 1.3 percent to $110.52 and was the biggest boost to the Dow industrials.

Trading volume was higher than it has been in recent days. Volume of the NYSE, Amex, and Nasdaq was 7.80 billion compared to its 20-day moving average of 6.97 billion. The wider participation comes after four down days when market movements were minimal and volume generally light.

Stocks also got a boost after Greek Finance Minister Evangelos Venizelos said talks between Athens and its private creditors were “one formal step away” from a deal needed to avoid a messy default. Such a deal would be a significant step in removing one of the biggest worries for investors.

U.S. and European banks rallied on the news. Bank of America Corp (BAC.N) gained 3.2 percent to $7.36 and Citigroup (C.N) rose 2.9 percent to $31.60.

The Dow Jones industrial average (.DJI) gained 83.55 points, or 0.66 percent, to 12,716.46. The Standard & Poor’s 500 Index (.SPX) rose 11.67 points, or 0.89 percent, to 1,324.08. The Nasdaq Composite Index (.IXIC) climbed 34.43 points, or 1.22 percent, to 2,848.27.

After the S&P 500 rose 4.4 percent last month, some strategists see the benchmark approaching a short-term top. The index could be “near the upper end of a trading band,” with a top around 1,350, according to John Manley, chief equity strategist at Wells Fargo Funds Management in New York.

“I’d rather own stocks than not, but on a year horizon,” he said, indicating equities could pull back in the near term.

Homebuilder shares advanced after U.S. data showed construction spending surged in December to its highest level in more than 1-1/2 years. An index of housing stocks (.HGX) rose 1.8 percent. Shares in PulteGroup Inc (PHM.N), the second largest U.S. homebuilder, rose 5.1 percent to $7.83.

Amazon.com Inc (AMZN.O) slid 7.7 percent to $179.46 a day after the online retailer warned of a possible first-quarter loss and posted a steep drop in fourth-quarter profit.

According to Thomson Reuters data, with 228 companies having

reported results, 61 percent have beaten expectations – below the 70 percent beat rate of recent quarters.

Whirlpool Corp (WHR.N) surged 13.5 percent to $61.64 after giving an optimistic full-year outlook.

U.S. Treasuries prices fell on Wednesday as European risk assets improved, dampening demand for the safe-haven bonds, and as buying ebbed following a day of large month-end purchases.

Depressed Treasury yields, which point to caution on the part of investors, have been a reason for some to distrust a gain in stocks predicated on signs of an improving economy.

Facebook was expected to submit paperwork to regulators for a $5 billion initial public offering and selected Morgan Stanley (MS.N) and four other bookrunners to handle the IPO, sources told IFR, a unit of Thomson Reuters.

Morgan Stanley shares gained 4 percent to $19.39.

(Additional reporting by Rodrigo Campos; Editing by Padraic Cassidy)

NEW YORK (Reuters) – Stocks extended January’s rally, climbing more than 1 percent on Wednesday after upbeat global manufacturing data and as Greece neared a long-delayed deal with private creditors.

The recent run of better-than-expected economic data around the globe has helped lift world equity markets as investors move away from a worst-case scenario for the global economy.

An index of the U.S. manufacturing sector rose in January to its highest level since June, an industry group said, while China’s factory sector expanded slightly, confounding expectations for a contraction. Germany recorded its first rise in manufacturing output in four months.

Optimism over the economy spurred gains in industrials, financials and basic materials, which rose between 1.5 percent and 2 percent. Caterpillar Inc (CAT.N), a company heavily exposed to global industry, rose 1.6 percent to $110.88 and was the biggest boost to the Dow industrials.

“The numbers aren’t horrible, the trend continues that the news is OK,” said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. “I think we’re going to grind higher.”

Stocks also got a boost after Greek Finance Minister Evangelos Venizelos said talks between Athens and its private creditors were “one formal step away” from a deal needed to avoid a messy default.

U.S. and European banks rallied on the news. Bank of America (BAC.N) gained 3.5 percent to $7.39 and Citigroup (C.N) rose 4 percent to $31.94.

The Dow Jones industrial average (.DJI) gained 125.07 points, or 0.99 percent, to 12,757.98. The Standard & Poor’s 500 Index (.SPX) rose 15.62 points, or 1.19 percent, to 1,328.03. The Nasdaq Composite Index (.IXIC) added 37.31 points, or 1.33 percent, to 2,851.15.

After the S&P 500 rose 4.4 percent last month, some strategists see the benchmark approaching a short-term top. The index could be “near the upper end of a trading band,” with a top around 1,350, according to John Manley, chief equity strategist at Wells Fargo Funds Management in New York.

“I’d rather own stocks than not, but on a year horizon,” he said, indicating equities could pull back in the near term.

Homebuilder shares advanced after U.S. data showed construction spending surged in December to its highest level in more than 1-1/2 years. An index of housing stocks (.HGX) rose 1.9 percent.

Amazon (AMZN.O) slid 7.9 percent to $179.10 a day after the online retailer warned of a possible first-quarter loss and posted a steep drop in fourth-quarter profit.

According to Thomson Reuters data, with 228 companies having

reported results, 61 percent have beaten expectations – below the 70 percent beat rate of recent quarters.

Whirlpool (WHR.N) surged 17.7 percent to $63.91 after giving an optimistic full-year outlook.

Facebook was expected to submit paperwork to regulators for a $5 billion initial public offering and selected Morgan Stanley (MS.N) and four other bookrunners to handle the IPO, sources told Reuters unit IFR.

Morgan Stanley shares gained 5.4 percent to $19.66.

(Reporting by Edward Krudy, additional reporting by Chuck Mikolajczak; editing by Kenneth Barry)

NEW YORK (Reuters) – Stocks extended January’s rally, climbing more than 1 percent on Wednesday after upbeat global manufacturing data and as Greece neared a long-delayed deal with private creditors.

The recent run of better-than-expected economic data around the globe has helped lift world equity markets as investors move away from a worst-case scenario for the global economy.

An index of the U.S. manufacturing sector rose in January to its highest level since June, an industry group said, while China’s factory sector expanded slightly, confounding expectations for a contraction. Germany recorded its first rise in manufacturing output in four months.

Optimism over the economy spurred gains in industrials, financials and basic materials, which rose between 1.5 percent and 2 percent. Caterpillar Inc (CAT.N), a company heavily exposed to global industry, rose 1.6 percent to $110.88 and was the biggest boost to the Dow industrials.

“The numbers aren’t horrible, the trend continues that the news is OK,” said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. “I think we’re going to grind higher.”

Stocks also got a boost after Greek Finance Minister Evangelos Venizelos said talks between Athens and its private creditors were “one formal step away” from a deal needed to avoid a messy default.

U.S. and European banks rallied on the news. Bank of America (BAC.N) gained 3.5 percent to $7.39 and Citigroup (C.N) rose 4 percent to $31.94.

The Dow Jones industrial average (.DJI) gained 125.07 points, or 0.99 percent, to 12,757.98. The Standard & Poor’s 500 Index (.SPX) rose 15.62 points, or 1.19 percent, to 1,328.03. The Nasdaq Composite Index (.IXIC) added 37.31 points, or 1.33 percent, to 2,851.15.

After the S&P 500 rose 4.4 percent last month, some strategists see the benchmark approaching a short-term top. The index could be “near the upper end of a trading band,” with a top around 1,350, according to John Manley, chief equity strategist at Wells Fargo Funds Management in New York.

“I’d rather own stocks than not, but on a year horizon,” he said, indicating equities could pull back in the near term.

Homebuilder shares advanced after U.S. data showed construction spending surged in December to its highest level in more than 1-1/2 years. An index of housing stocks (.HGX) rose 1.9 percent.

Amazon (AMZN.O) slid 7.9 percent to $179.10 a day after the online retailer warned of a possible first-quarter loss and posted a steep drop in fourth-quarter profit.

According to Thomson Reuters data, with 228 companies having

reported results, 61 percent have beaten expectations – below the 70 percent beat rate of recent quarters.

Whirlpool (WHR.N) surged 17.7 percent to $63.91 after giving an optimistic full-year outlook.

Facebook was expected to submit paperwork to regulators for a $5 billion initial public offering and selected Morgan Stanley (MS.N) and four other bookrunners to handle the IPO, sources told Reuters unit IFR.

Morgan Stanley shares gained 5.4 percent to $19.66.

(Reporting by Edward Krudy, additional reporting by Chuck Mikolajczak; editing by Kenneth Barry)

NEW YORK (Reuters) – Stocks extended January’s rally, climbing more than 1 percent, on Wednesday after upbeat global manufacturing data and as Greece neared a long-delayed deal on its debt.

An index of the U.S. manufacturing sector rose in January to its highest level since June, an industry group said, while China’s factory sector expanded slightly, confounding expectations for a contraction. Germany recorded its first rise in manufacturing output in four months.

“Manufacturing numbers are what the market is jumping on,” said John Manley, chief equity strategist at Wells Fargo Funds Management in New York.

Stocks also got a boost after Greek Finance Minister Evangelos Venizelos said talks between Athens and its private creditors were “one formal step away” from a deal needed to avoid a messy default.

U.S. and European banks rallied on the news. Bank of America (BAC.N) gained 3.6 percent to $7.39 and Citigroup (C.N) rose 3.8 percent to $31.88.

Homebuilder shares advanced after U.S. data showed construction spending surged in December to its highest level in more than 1-1/2 years. An index of housing stocks (.HGX) rose 1.5 percent.

The Dow Jones industrial average (.DJI) rose 138.65 points, or 1.10 percent, to 12,771.56. The S&P 500 Index (.SPX) gained 14.33 points, or 1.09 percent, to 1,326.74. The Nasdaq Composite (.IXIC) added 32.03 points, or 1.14 percent, to 2,845.87.

After the S&P 500 rose 4.4 percent last month, some traders see the benchmark index near a short-term top. Wells Fargo’s Manley said the index is “near the upper end of a trading band,” with a top below 1,350.

“I’d rather own stocks than not, but on a year horizon,” he said, indicating stocks could pull back in the near term.

Amazon (AMZN.O) slid 9.1 percent to $176.61 a day after the online retailer warned of a possible first-quarter loss and posted a steep drop in fourth-quarter profit.

According to Thomson Reuters data, with 228 companies having

reported results, 61 percent have beaten expectations – below the 70 percent beat rate of recent quarters.

Whirlpool (WHR.N) surged 15.6 percent to $62.80 after giving an optimistic full-year outlook.

Facebook was expected to submit paperwork to regulators for a $5 billion initial public offering and selected Morgan Stanley (MS.N) and four other bookrunners to handle the IPO, sources told Reuters unit IFR.

Morgan Stanley shares gained 5.1 percent to $19.60.

(Reporting by Rodrigo Campos; editing by Kenneth Barry)

NEW YORK (Reuters) – Stock index futures fell on Monday as concerns grew about the state of Europe’s finances as Greece and Germany sparred over budget measures for Athens.

Bank stocks led the way lower after a report that Germany was pushing for Greece to give up control over its budget policy to European institutions as part of discussions over a second bailout package.

The issues in Greece added to uncertainty ahead of a Monday summit where European Union leaders will sign off on a permanent rescue fund for the euro zone. The leaders are expected to agree on a balanced budget rule in national legislation.

While sentiment has improved over the euro zone lately, with the S&P 500 up 4.7 percent this month, many investors still view the region with caution as setbacks in solving its sovereign debt issues could hamper international economic growth and erode domestic bank profits.

“The inability of Greece and Germany to agree on a budget deal increases the likelihood that Greece will have to leave the euro zone, an event that would be a shock to the system,” said Oliver Pursche, president at Gary Goldberg Financial Services in Suffern, New York.

“In addition, while we could still rally on good news, the recent GDP data was disappointing and earnings have been mixed.”

U.S.-listed shares of Barclays Plc (BCS.N) fell 3.2 percent to $13.64, and Deutsche Bank (DB.N) sank 4.8 percent to $42.47. European shares were down 0.7 percent while an index of European banks (.SX7P) lost 2.6 percent.

Standard & Poor’s late Friday issued negative ratings on three brokerage firms, including Jefferies Group Inc (JEF.N), citing the impact of a prolonged crisis in Europe.

S&P 500 futures fell 8.7 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 79 points and Nasdaq 100 futures sank 16 points.

Issues in Europe have taken a backseat to the focus on corporate earnings in recent weeks. So far a majority of companies have topped analyst consensus expectations, though by a lower rate than previous quarters.

Gannett Co (GCI.N) and McKesson Corp (MCK.N) are scheduled to report Monday, with Amazon.com Inc (AMZN.O) Exxon Mobil Corp (XOM.N) and Pfizer Inc (PFE.N) on tap for later this week.

Swiss engineering group ABB (ABBN.VX) agreed to buy U.S. electrical components maker Thomas & Betts Corp (TNB.N) for $3.9 billion in cash, sending shares of the company up 22 percent to $70.87 in premarket trading.

Bank of America Corp (BAC.N) is shaking up the leadership of its investment bank as it looks to find its footing in a difficult market environment. The stock fell 2 percent in premarket trading.

Economic indicators on tap for Monday include December personal income and consumption data, as well as a measure of U.S. Midwest manufacturing. Income is seen rising 0.4 percent after a 0.1 percent rise in November, and consumption is forecast to rise 0.1 percent from November.

U.S. stocks trimmed losses to end little changed on Friday, as investors saw dips in the market as an opportunity to buy into what has been a strong first month of 2012.

(Editing by Padraic Cassidy)

NEW YORK (Reuters) – Stocks rising, bulls rampant are motifs you might pick if designing a coat of arms for Wall Street at the moment. But the motto should read: Caveat emptor. Yes, buyer beware.

The S&P 500, a broad measure of the market valuation of the biggest U.S. publicly traded companies, is up 20 percent from its October closing low. It keeps climbing on a mixed bag of fourth-quarter earnings, improving U.S. economic data, and easing credit conditions in Europe. It now stands at its highest level since early last August.

We have already seen what is probably the first upgrade of a target level for the index this year courtesy of Credit Suisse.

The CBOE Volatility Index, or VIX (.VIX), a measure of what investors are paying to protect themselves against the risk of losses, is at its lowest level in seven months.

So it raises the question: Is this another Jackson Hole moment for risk assets?

At the Wyoming retreat in late August 2010, Federal Reserve Chairman Ben Bernanke sparked what was the second major leg of the stock market’s rally from bear market lows the year before.

Is this the start of the third?

FRIENDLIER FOOTING FOR STOCKS

For Andrew Garthwaite, the Credit Suisse analyst behind the firm’s more bullish stance, there are big changes afoot that are creating a more benign environment for stocks.

First, the European Central Bank’s long-term repo operations are succeeding in reducing stresses in the region’s banking sector. This week, three-month dollar Libor, the cost at which European banks can borrow dollars, marked its ninth straight day of declines.

Analysts say heavy cash infusions from the European Central Bank since late last year and signs of revived willingness to lend by U.S. investors in the new year show the banking system is flush with cash.

The U.S. economy is looking stronger than thought, with notable movement in the long-dormant housing market, where sales of previously owned homes just rose to an 11-month high.

In China, the engine of global growth whose manufacturing sector has been showing worrying signs of slowing, policymakers have demonstrated willingness to make conditions easier by lowering banks’ reserve requirements.

“As we approach our year-end target two weeks into January, we have to ask ourselves the following questions: What has changed? Will equities rally further?,” Garthwaite said in a research note.

His answer to the second question was yes. Credit Suisse raised its year-end S&P 500 target to 1,400 from 1,340. Critically, however, the firm did not overweight equities, saying the risks of a more severe recession in Europe and a slowdown stateside were still there.

HEALTHY DOSE OF SKEPTICISM

For Nicholas Colas, chief market strategist at the ConvergEx Group in New York, the rally remains largely untested. More scary headlines from Europe or any signs that the global economy is deteriorating could spark a sharp reversal.

Heading into the weekend, Greece was closing in on an initial deal with private bondholders that would prevent it from tumbling into a chaotic default. Creditors faced to 70 percent of the loans they have given to Athens.

“It’s a confidence-based rally with the overhang of several still meaningful events to come,” Colas said. “It is all well and good to say that the Greek default is well understood, but we haven’t gone through it.”

Outside the United States, there are mixed signals from the global economy, too.

China’s factory activity likely fell for a third successive month in January. The HSBC flash manufacturing purchasing managers index (PMI), the earliest indicator of China’s industrial activity, stood below 50.

The Baltic Exchange’s main sea freight index (.BADI), which tracks rates to ship dry commodities and can be a useful gauge of economic activity, fell to its lowest level in three years on Friday on a growing surplus of vessels and a slump in cargo demand.

That is at odds with the work of RBC technical analyst Robert Sluymer. He sees growing outperformance of industrial metal copper to the safe-haven bet of gold as well as an upturn in a basket of Asian currencies as a bullish sign for the economy.

The caution generated by the mismatches in the various data points is perhaps reflected in by U.S. interest rates.

The yield on the U.S. 10-year Treasury note has hovered at 2 percent or just below for the last month despite a brief spike in mid-December. That suggests bondholders are not eagerly embracing the improving economy thesis for the moment.

“There is still a lot of skepticism about recovery, about moving into risk assets, about a lot of things,” Colas said.

“If you really wanted to believe this about incrementally economic certainty and expansion … I would have thought you’d expect to see the 10-year back over 2 percent.”

EARNINGS, DATA AND THE FED

A blitz of earnings and economic indicators next week will provide an important gauge of the economy’s health.

What’s more, the Federal Reserve’s policymakers will convene their first meeting of the year with a two-day session that starts on Tuesday. The Federal Open Market Committee, the Fed’s rate-setting panel, will release its policy statement on Wednesday. No fireworks are expected, but a decision to release individual policymakers’ interest-rate forecasts could alter expectations for rates on the margins.

Monday will start one of the two most hectic weeks of the earnings season. Marquee names due to report earnings on Monday include Texas Instruments Inc (TXN.O) and Halliburton Co (HAL.N), followed by Apple Inc (AAPL.O), DuPont (DD.N), Johnson & Johnson (JNJ.N), McDonald’s Corp (MCD.N), Verizon Communications (VZ.N) and Yahoo! Inc (YHOO.O) – all on Tuesday.

Boeing (BA.N), ConocoPhillips (COP.N) and United Technologies (UTX.N) are set to release results on Wednesday. Thursday’s earnings line-up includes 3M Co (MMM.N), AT&T Inc (T.N), Starbucks (SBUX.O) and Time Warner Cable Inc (TWC.N). On Friday, earnings are expected from Chevron Corp (CVX.N), Honeywell International (HON.N) and Procter & Gamble Co. (PG.N)

In the coming week, economic indicators to watch will include December pending home sales data, a key measure of the housing market, on Wednesday as well as the latest weekly claims for jobless benefits on Thursday. December durable goods orders and new home sales for December also will be released on Thursday.

The week will wrap up with the Commerce Department’s first look at fourth-quarter U.S. gross domestic product and the final reading for January on consumer sentiment from Reuters and the University of Michigan.

In terms of companies beating expectations, fourth-quarter earnings season has not been as good as previous ones. Of the approximately 70 companies in the S&P 500 that have reported earnings so far, 60 percent have exceeded analysts’ estimates, according to Thomson Reuters data.

In comparison, in the third quarter at this early point in the reporting cycle, 68 percent had beaten Wall Street’s forecasts – well below the 78 percent in that category in the second quarter, Thomson Reuters data showed.

There have also been some high-profile misses on both revenue and earnings.

General Electric Co’s (GE.N) fourth-quarter revenue fell short of Wall Street’s expectations, with Europe’s weakening economy and weak appliance sales the main culprits.

On the other hand, banks’ earnings have served as a positive catalyst for the stock market so far. The sector has been one of the market’s leaders despite mixed earnings, a sign that investors’ worst fears did not materialize.

(Reporting By Edward Krudy; Editing by Jan Paschal.)

NEW YORK (Reuters) – Stocks rising, bulls rampant are motifs you might pick if designing a coat of arms for Wall Street at the moment. But the motto should read: Caveat emptor. Yes, buyer beware.

The S&P 500, a broad measure of the market valuation of the biggest U.S. publicly traded companies, is up 20 percent from its October closing low. It keeps climbing on a mixed bag of fourth-quarter earnings, improving U.S. economic data, and easing credit conditions in Europe. It now stands at its highest level since early last August.

We have already seen what is probably the first upgrade of a target level for the index this year courtesy of Credit Suisse.

The CBOE Volatility Index, or VIX (.VIX), a measure of what investors are paying to protect themselves against the risk of losses, is at its lowest level in seven months.

So it raises the question: Is this another Jackson Hole moment for risk assets?

At the Wyoming retreat in late August 2010, Federal Reserve Chairman Ben Bernanke sparked what was the second major leg of the stock market’s rally from bear market lows the year before.

Is this the start of the third?

FRIENDLIER FOOTING FOR STOCKS

For Andrew Garthwaite, the Credit Suisse analyst behind the firm’s more bullish stance, there are big changes afoot that are creating a more benign environment for stocks.

First, the European Central Bank’s long-term repo operations are succeeding in reducing stresses in the region’s banking sector. This week, three-month dollar Libor, the cost at which European banks can borrow dollars, marked its ninth straight day of declines.

Analysts say heavy cash infusions from the European Central Bank since late last year and signs of revived willingness to lend by U.S. investors in the new year show the banking system is flush with cash.

The U.S. economy is looking stronger than thought, with notable movement in the long-dormant housing market, where sales of previously owned homes just rose to an 11-month high.

In China, the engine of global growth whose manufacturing sector has been showing worrying signs of slowing, policymakers have demonstrated willingness to make conditions easier by lowering banks’ reserve requirements.

“As we approach our year-end target two weeks into January, we have to ask ourselves the following questions: What has changed? Will equities rally further?,” Garthwaite said in a research note.

His answer to the second question was yes. Credit Suisse raised its year-end S&P 500 target to 1,400 from 1,340. Critically, however, the firm did not overweight equities, saying the risks of a more severe recession in Europe and a slowdown stateside were still there.

HEALTHY DOSE OF SKEPTICISM

For Nicholas Colas, chief market strategist at the ConvergEx Group in New York, the rally remains largely untested. More scary headlines from Europe or any signs that the global economy is deteriorating could spark a sharp reversal.

Heading into the weekend, Greece was closing in on an initial deal with private bondholders that would prevent it from tumbling into a chaotic default. Creditors faced to 70 percent of the loans they have given to Athens.

“It’s a confidence-based rally with the overhang of several still meaningful events to come,” Colas said. “It is all well and good to say that the Greek default is well understood, but we haven’t gone through it.”

Outside the United States, there are mixed signals from the global economy, too.

China’s factory activity likely fell for a third successive month in January. The HSBC flash manufacturing purchasing managers index (PMI), the earliest indicator of China’s industrial activity, stood below 50.

The Baltic Exchange’s main sea freight index (.BADI), which tracks rates to ship dry commodities and can be a useful gauge of economic activity, fell to its lowest level in three years on Friday on a growing surplus of vessels and a slump in cargo demand.

That is at odds with the work of RBC technical analyst Robert Sluymer. He sees growing outperformance of industrial metal copper to the safe-haven bet of gold as well as an upturn in a basket of Asian currencies as a bullish sign for the economy.

The caution generated by the mismatches in the various data points is perhaps reflected in by U.S. interest rates.

The yield on the U.S. 10-year Treasury note has hovered at 2 percent or just below for the last month despite a brief spike in mid-December. That suggests bondholders are not eagerly embracing the improving economy thesis for the moment.

“There is still a lot of skepticism about recovery, about moving into risk assets, about a lot of things,” Colas said.

“If you really wanted to believe this about incrementally economic certainty and expansion … I would have thought you’d expect to see the 10-year back over 2 percent.”

EARNINGS, DATA AND THE FED

A blitz of earnings and economic indicators next week will provide an important gauge of the economy’s health.

What’s more, the Federal Reserve’s policymakers will convene their first meeting of the year with a two-day session that starts on Tuesday. The Federal Open Market Committee, the Fed’s rate-setting panel, will release its policy statement on Wednesday. No fireworks are expected, but a decision to release individual policymakers’ interest-rate forecasts could alter expectations for rates on the margins.

Monday will start one of the two most hectic weeks of the earnings season. Marquee names due to report earnings on Monday include Texas Instruments Inc (TXN.O) and Halliburton Co (HAL.N), followed by Apple Inc (AAPL.O), DuPont (DD.N), Johnson & Johnson (JNJ.N), McDonald’s Corp (MCD.N), Verizon Communications (VZ.N) and Yahoo! Inc (YHOO.O) – all on Tuesday.

Boeing (BA.N), ConocoPhillips (COP.N) and United Technologies (UTX.N) are set to release results on Wednesday. Thursday’s earnings line-up includes 3M Co (MMM.N), AT&T Inc (T.N), Starbucks (SBUX.O) and Time Warner Cable Inc (TWC.N). On Friday, earnings are expected from Chevron Corp (CVX.N), Honeywell International (HON.N) and Procter & Gamble Co. (PG.N)

In the coming week, economic indicators to watch will include December pending home sales data, a key measure of the housing market, on Wednesday as well as the latest weekly claims for jobless benefits on Thursday. December durable goods orders and new home sales for December also will be released on Thursday.

The week will wrap up with the Commerce Department’s first look at fourth-quarter U.S. gross domestic product and the final reading for January on consumer sentiment from Reuters and the University of Michigan.

In terms of companies beating expectations, fourth-quarter earnings season has not been as good as previous ones. Of the approximately 70 companies in the S&P 500 that have reported earnings so far, 60 percent have exceeded analysts’ estimates, according to Thomson Reuters data.

In comparison, in the third quarter at this early point in the reporting cycle, 68 percent had beaten Wall Street’s forecasts – well below the 78 percent in that category in the second quarter, Thomson Reuters data showed.

There have also been some high-profile misses on both revenue and earnings.

General Electric Co’s (GE.N) fourth-quarter revenue fell short of Wall Street’s expectations, with Europe’s weakening economy and weak appliance sales the main culprits.

On the other hand, banks’ earnings have served as a positive catalyst for the stock market so far. The sector has been one of the market’s leaders despite mixed earnings, a sign that investors’ worst fears did not materialize.

(Reporting By Edward Krudy; Editing by Jan Paschal.)

NEW YORK (Reuters) – Stocks rising, bulls rampant are motifs you might pick if designing a coat of arms for Wall Street at the moment. But the motto should read: Caveat emptor. Yes, buyer beware.

The S&P 500, a broad measure of the market valuation of the biggest U.S. publicly traded companies, is up 20 percent from its October closing low. It keeps climbing on a mixed bag of fourth-quarter earnings, improving U.S. economic data, and easing credit conditions in Europe. It now stands at its highest level since early last August.

We have already seen what is probably the first upgrade of a target level for the index this year courtesy of Credit Suisse.

The CBOE Volatility Index, or VIX (.VIX), a measure of what investors are paying to protect themselves against the risk of losses, is at its lowest level in seven months.

So it raises the question: Is this another Jackson Hole moment for risk assets?

At the Wyoming retreat in late August 2010, Federal Reserve Chairman Ben Bernanke sparked what was the second major leg of the stock market’s rally from bear market lows the year before.

Is this the start of the third?

FRIENDLIER FOOTING FOR STOCKS

For Andrew Garthwaite, the Credit Suisse analyst behind the firm’s more bullish stance, there are big changes afoot that are creating a more benign environment for stocks.

First, the European Central Bank’s long-term repo operations are succeeding in reducing stresses in the region’s banking sector. This week, three-month dollar Libor, the cost at which European banks can borrow dollars, marked its ninth straight day of declines.

Analysts say heavy cash infusions from the European Central Bank since late last year and signs of revived willingness to lend by U.S. investors in the new year show the banking system is flush with cash.

The U.S. economy is looking stronger than thought, with notable movement in the long-dormant housing market, where sales of previously owned homes just rose to an 11-month high.

In China, the engine of global growth whose manufacturing sector has been showing worrying signs of slowing, policymakers have demonstrated willingness to make conditions easier by lowering banks’ reserve requirements.

“As we approach our year-end target two weeks into January, we have to ask ourselves the following questions: What has changed? Will equities rally further?,” Garthwaite said in a research note.

His answer to the second question was yes. Credit Suisse raised its year-end S&P 500 target to 1,400 from 1,340. Critically, however, the firm did not overweight equities, saying the risks of a more severe recession in Europe and a slowdown stateside were still there.

HEALTHY DOSE OF SKEPTICISM

For Nicholas Colas, chief market strategist at the ConvergEx Group in New York, the rally remains largely untested. More scary headlines from Europe or any signs that the global economy is deteriorating could spark a sharp reversal.

Heading into the weekend, Greece was closing in on an initial deal with private bondholders that would prevent it from tumbling into a chaotic default. Creditors faced to 70 percent of the loans they have given to Athens.

“It’s a confidence-based rally with the overhang of several still meaningful events to come,” Colas said. “It is all well and good to say that the Greek default is well understood, but we haven’t gone through it.”

Outside the United States, there are mixed signals from the global economy, too.

China’s factory activity likely fell for a third successive month in January. The HSBC flash manufacturing purchasing managers index (PMI), the earliest indicator of China’s industrial activity, stood below 50.

The Baltic Exchange’s main sea freight index (.BADI), which tracks rates to ship dry commodities and can be a useful gauge of economic activity, fell to its lowest level in three years on Friday on a growing surplus of vessels and a slump in cargo demand.

That is at odds with the work of RBC technical analyst Robert Sluymer. He sees growing outperformance of industrial metal copper to the safe-haven bet of gold as well as an upturn in a basket of Asian currencies as a bullish sign for the economy.

The caution generated by the mismatches in the various data points is perhaps reflected in by U.S. interest rates.

The yield on the U.S. 10-year Treasury note has hovered at 2 percent or just below for the last month despite a brief spike in mid-December. That suggests bondholders are not eagerly embracing the improving economy thesis for the moment.

“There is still a lot of skepticism about recovery, about moving into risk assets, about a lot of things,” Colas said.

“If you really wanted to believe this about incrementally economic certainty and expansion … I would have thought you’d expect to see the 10-year back over 2 percent.”

EARNINGS, DATA AND THE FED

A blitz of earnings and economic indicators next week will provide an important gauge of the economy’s health.

What’s more, the Federal Reserve’s policymakers will convene their first meeting of the year with a two-day session that starts on Tuesday. The Federal Open Market Committee, the Fed’s rate-setting panel, will release its policy statement on Wednesday. No fireworks are expected, but a decision to release individual policymakers’ interest-rate forecasts could alter expectations for rates on the margins.

Monday will start one of the two most hectic weeks of the earnings season. Marquee names due to report earnings on Monday include Texas Instruments Inc (TXN.O) and Halliburton Co (HAL.N), followed by Apple Inc (AAPL.O), DuPont (DD.N), Johnson & Johnson (JNJ.N), McDonald’s Corp (MCD.N), Verizon Communications (VZ.N) and Yahoo! Inc (YHOO.O) – all on Tuesday.

Boeing (BA.N), ConocoPhillips (COP.N) and United Technologies (UTX.N) are set to release results on Wednesday. Thursday’s earnings line-up includes 3M Co (MMM.N), AT&T Inc (T.N), Starbucks (SBUX.O) and Time Warner Cable Inc (TWC.N). On Friday, earnings are expected from Chevron Corp (CVX.N), Honeywell International (HON.N) and Procter & Gamble Co. (PG.N)

In the coming week, economic indicators to watch will include December pending home sales data, a key measure of the housing market, on Wednesday as well as the latest weekly claims for jobless benefits on Thursday. December durable goods orders and new home sales for December also will be released on Thursday.

The week will wrap up with the Commerce Department’s first look at fourth-quarter U.S. gross domestic product and the final reading for January on consumer sentiment from Reuters and the University of Michigan.

In terms of companies beating expectations, fourth-quarter earnings season has not been as good as previous ones. Of the approximately 70 companies in the S&P 500 that have reported earnings so far, 60 percent have exceeded analysts’ estimates, according to Thomson Reuters data.

In comparison, in the third quarter at this early point in the reporting cycle, 68 percent had beaten Wall Street’s forecasts – well below the 78 percent in that category in the second quarter, Thomson Reuters data showed.

There have also been some high-profile misses on both revenue and earnings.

General Electric Co’s (GE.N) fourth-quarter revenue fell short of Wall Street’s expectations, with Europe’s weakening economy and weak appliance sales the main culprits.

On the other hand, banks’ earnings have served as a positive catalyst for the stock market so far. The sector has been one of the market’s leaders despite mixed earnings, a sign that investors’ worst fears did not materialize.

(Reporting By Edward Krudy; Editing by Jan Paschal)

LONDON (Reuters) – The worst is yet to come in the euro zone’s debt crisis but the currency union will survive 2012 intact, according to a Reuters poll of economists who say France will probably lose its top-notch credit rating.

While just nine out of the poll’s 64 economists said the bloc had turned the corner on a sovereign debt crisis, only 10 said the euro zone would not survive the year in its current form. The rest were reasonably confident it would.

A similarly firm majority of those surveyed in the last few days said France would lose its coveted ‘AAA’ rating in the next three months, while Belgium, Italy and Spain will suffer further cuts to their ratings.

Athens, which is racing to secure funding from its euro zone partners and the International Monetary Fund to avoid a sovereign default in March, was cited as the most pressing risk to the euro zone’s economic stability.

“All eyes are still on Greece. The situation looks extraordinarily bleak. The household sector is getting hammered … the banking sector is getting pummeled to pieces,” said James Nixon at Societe Generale.

“But if someone keeps writing the cheques Greece will survive.”

The poll indicates at least some improvement in sentiment compared with late last year. A November poll of leading academics and former policymakers, for instance, said the euro zone was not likely to emerge from the crisis intact.

However, many of the economists in the latest poll work for the large European banks that stand to lose the most under the gloomier scenarios for the single currency bloc – perhaps one factor behind the relatively more hopeful outlook.

STILL NO QE

Late last year, the European Central Bank pumped around half a trillion euros of cheap three-year money into the banking system to ease tensions in money markets.

Four-fifths of respondents said this had relieved pressure on the bank to start printing money, given that some of this excess cash has found its way into the government securities the ECB is reluctant to purchase.

ECB policymaker Christian Noyer noted last week that European sovereign debt sales had been going much better since the central bank started to extend long-term loans to banks.

The ECB has bought government bonds from some member states, notably Italy and Spain, to lessen painfully high borrowing costs in its regular program.

But it has “sterilized” these purchases by draining equal amounts of liquidity from the banking system.

Otherwise, the process would be quantitative easing (QE), purchasing bonds with freshly printed money. The Federal Reserve and the Bank of England have been conducting QE for several years in vast sums.

Economists gave only roughly one-in-three odds that the ECB would do the same before June, in line with a poll taken last week.

But David Riley, the head of sovereign ratings for credit agency Fitch, said on Wednesday the ECB should ramp up its bond buying to support Italy and prevent a “cataclysmic” collapse of the euro.

ECB President Mario Draghi has made clear he is against conducting outright QE.

“The only situation where I can see QE in the euro zone is if there a deflation risk. At the moment I don’t think that is where we are going,” said Silvio Peruzzo at RBS.

MARKED DOWN

Last year was a tumultuous one for the euro zone. Governments tried to slash debts with unpopular austerity budgets while simultaneously attempting to restore market confidence, ending up in or on the edge of recession in the process.

The stalling economy in turn has hit government balance sheets in desperate need of repair.

France will probably lose its triple-A credit rating in the next three months, according to the poll, which found 18 of 59 saying it was highly likely and 33 that it was likely.

A cut to the rating would potentially make borrowing more expensive but agency Standard & Poor’s said on Friday that France would not necessarily suffer financially if its credit rating was lowered, as experience from the United States shows.

“Being downgraded is a bit like moving to 19 from 20 out of 20 in high school,” S&P’s Europe economist Jean-Michel Six said.

Belgium, Italy and Spain will also see further downgrades to their ratings, the vast majority of economists predicted, after being placed on warning for ratings cuts late last year.

“The rhetoric of the ratings agencies at the end of last year has been pretty clear,” said Peruzzo.

“There is a situation where most of them are questioning the infrastructure of the euro zone and the ability of the policy tools available to mitigate the fall out of the crisis,” Peruzzo said.

(Polling by Sumanta Dey and Ruby Cherian; Editing by John Stonestreet)

LONDON (Reuters) – Hedge funds are taking on the powerful International Monetary Fund over its plan to slash Greece’s towering debt burden as time runs out on the talks that could sway the future of Europe’s single currency.

The funds have built up such a powerful positions in Greek bonds that they could derail Europe’s tactic of getting banks and other bondholders to share the burden of reducing the country’s debt on a voluntary basis.

Bondholders need to give up some 100 billion euros ($130 billion) of their investment in the planned bond swap, drawn up in October, but many hedge funds plan to stay out of it.

They either prefer letting the country go under, which would trigger the credit insurance they have bought, or hope to get paid out in full if enough others sign up. That puts them in direct conflict with the IMF, which wants to force Greece’s cost of financing down to an affordable level.

“The play is purely ‘they’ll be forced to pay me’. Greece will want to avoid a wider default. so if it managed to restructure 80 percent of the deal and pay the rest that’s still better,” said Gabriel Sterne at securities firm Exotix.

Without a deal, the IMF, the European Union and the European Central Bank — the so-called troika of official lenders — will not pay out a second bail-out package Greece needs to survive.

EU Economic and Monetary Affairs Commissioner Olli Rehn said on Tuesday that negotiators were “about to finalize shortly”. But time is running out.

Without the money, the country is likely to default around March 20, when a 14.5 billion euro bond falls due. A deal needs to come well before that, because the paperwork alone takes at least six weeks.

On Monday German Chancellor Angela Merkel and French President Nicolas Sarkozy, the euro zone’s two leading powers, insisted private-sector bondholders must share in reducing Greece’s debt burden.

But the hedge funds are resisting, unlike European banks holding Greek bonds, who have been pressured to agree by politicians.

There are other barriers too.

Banks represented by the Institute of International Finance (IIF) agreed last year to write off the notional value of their Greek bondholdings by 50 percent, a deal designed to reduce Greece’s debt ratio to 120 percent of its Gross Domestic Product by 2020.

But they have been unable to agree on the fine print of the refinancing – the coupon, maturity and the credit guarantees. These will determine the bonds’ Net Present Value (NPV), and thereby the actual hit the banks need to take.

DANGEROUS GAME

There are 206 billion euros of Greek government bonds in private sector hands — banks, institutional investors, and hedge funds — and it is likely that hedge funds have been building up their positions in the past months.

They have been snapping up chunks of Greece’s next big maturing bond, the March 20, for around 40 cents on the euro. Yields on the bond began to rise sharply in September and it was priced at 41-45.5 cents in the euro on Tuesday.

The bet is that other creditors will sign up to a voluntary deal, and that Greece will pay out in full the hedge funds who do not to avoid a default and trigger pay-out of Credit Default Swaps, a form of credit protection.

“Time is on your side, since investors, until now, have received full repayment on Greek debt obligations,” said Kristian Flyvholm at asset manager Jyske Invest.

Sterne, whose firm Exotix specializes in illiquid bond investing and counts hedge funds among its clients, said the bet had already worked for some funds. Greece paid out smaller issues maturing in December and January.

But it is a dangerous strategy.

Europe is increasingly likely to force investors to take a cut on their Greek bondholdings if they do not voluntarily sign up to the deal, Reuters reported in November.

Also, Greece could change its laws, which for the largest part do not contain the so-called Collective Action Clauses (CAC) that force dissenting minorities into line when new conditions are imposed on outstanding bonds.

It is unclear how large hedge fund holdings of Greek debt are. About 20 to 25 percent of Greece’s creditors were unidentified, and half of these could be hedge funds, one source close to the creditors told Reuters.

Whatever the scale of the hedge fund threat, the proportion of creditors seen likely to sign up for their haircut has slipped. The hopes are now 60 percent can be convinced by the end of the month, the same source said, far less than the 90 percent take-up the IIF was targeting in June.

At that low a level, it is unclear whether the troika of international lenders will consider the uptake big enough to warrant a pay-out of the second bail-out package.

IIF Managing Director Charles Dallara is due in Athens later this week for troika negotiations, and technical staff from the IMF are expected in the Greek capital from January 16.

IMF’S DOUBTS

The IMF itself seemed to throw doubt on the debt swap in an internal memo cited by German magazine Der Spiegel on Saturday.

According to the report, the IMF believes Greece will still be sinking under the burden of its debts even after a deal is struck, and that further measures may need to be taken if the country is to avoid default. Markets fear this could lead to reopening the October agreement.

In a leaked paper in October, the IMF already acknowledged that its the assumptions may need to be reassessed. That would mean lower interest rate payments by Greece, and an even more bitter hit for the banks.

The NPV loss for creditors could be near 65-70 percent and the coupon around 4.5 percent, bankers have indicated. Reuters reported in November Greece wanted a 75 percent NPV cut, a far higher number than the low 60s the banks had in mind.

($1 = 0.7851 euros)

(Additional reporting by Steve Slater and Sophie Sassard in London and Philipp Halstrick in Frankfurt, Writing by Douwe Miedema; Editing by Andrew Callus)