The market appears to be trading range bound, as jobless claims hold steady in the US, however the investment community is hearing more talk of a moderate recession in Europe. According to the EU's latest projections, they expect the 17-nation Euro economy to experience a moderate recession and contract 0.3% in 2012, with Greece expected to contract 4.4% due to austerity measures and Portugal expected to decline 3.3% as they try not to fall into the "Greece" category (ie the worst of the PIIGS). This is something to watch because China's economy is still dependent on exports, and a significant amount of their exports go to Europe. To put this perspective, the US GDP is comprised of 67% consumer goods consumption, whereas China's GDP is only comprised of 30% goods consumption. Therefore, if Europe's banks continue to shrink and GDP does contract, Europeans will not have as much access to liquidity, and could reduce their spending, further impacting their economic output.
In addition, in the U.S., there appears to be some technical resistance at play, as US equities, as measured by the S&P 500, have been up 8.3% to begin the year, with last year's "losers" (ie Financial Services) performing the best and last year's "winners" (ie utilities), performing the worst.
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