Business Blog Posts

Following the S&P 500's worst week in 15 last week, investors are trying to determine whether the predictions of a correction have been fulfilled or if there's still downside ahead as oil prices remain at elevated levels.

Shares could find some support Monday after positive commentary from Berkshire Hathaway Inc (BRKa.N) Chairman Warren Buffett, who said in his annual letter that Berkshire will engage in record capital spending in the coming year.

"They're certainly encouraging, especially for U.S. investing. I was struck by the level of capital investing he cited," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "Whether or not his remarks result in a Monday (rally) remains to be seen. Buffett is a long-term investor, not a timer. He tends to be early."

Along with the direction of oil, potential market movers this week for traders will be the February payrolls report, which will be released on Friday, and Federal Reserve Chairman Ben Bernanke's speech on Tuesday.

The benchmark S&P index fell 1.7 percent last week, a relatively mild pullback for an index that has gained more than 25 percent since the start of September.

"We were looking for a pullback of at least 5 percent and we didn't get it, so I don't think we can expect a lot of new entrants at these levels," said Leo Grohowski, who oversees about $166 billion in assets as chief investment officer at BNY Mellon Wealth Management in New York.

"With the gains we've had, and since tensions remain high in the Middle East, I don't expect to see aggressive buying on the dip this time around," Grohowski said.

A lack of new entrants could mean lighter volume, which could leave the market more susceptible to increased volatility. Lately, volume has been stronger on down days in the market.

"RISKIER" ENVIRONMENT

An unexpected surge in crude prices, sparked by Libya's popular uprising, pressured equities for much of the holiday-shortened previous week on concern that higher energy costs could stifle economic activity.

U.S. crude futures spiked as much as 20 percent during the week to a high of $103.41 per barrel, although they later fell below $100. The CBOE Volatility Index VIX .VIX rose 17 percent last week and at one point was up 30 percent.

Though many say the market remains overstretched, its resilience in the face of geopolitical uncertainty and some disappointing data has some encouraged.

Judy Moses, portfolio manager at Evercore Wealth Management in San Francisco, said that the week's drop had quieted some of the calls for consolidation.

"Had we not seen this pullback, our enthusiasm would be a little tapered because valuations would be fuller," she said. "But it does seem that in general the investment environment is a bit riskier now."