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Another quarter, another strong showing for US equities: The Dow Jones Industrials (NYSEARCA:DIA) gained 11.25% for the quarter. The S&P500 (NYSEARCA:SPY) gained 10.03%, while Tech-heavy NASDAQ (NASDAQ:QQQ) gained a moderate 8.21.25%, held down by Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Cisco Systems (NASDAQ:CSCO), and Priceline.com (NASDAQ:PCLN)-all four ending up the quarter in the red.

Major Equity Indexes

Index

3-Month Performance (%)

12-Month Performance (%)

SPDR S&P 500 Trust (SPY)

10.03

11.82

Powershares QQQ Trust (QQQ)

8.21

5.56

SPDR Dow Jones Industrial Average (DIA)

11.25

10.90

In the meantime Gold and silver continued their descent with SPDR Gold Shares (NYSEARCA:GLD) losing 4.1%, iShares Silver Trust (NYSEARCA:SLV) losing 1.5%, and Freeport McMoRan Copper and Gold losing 1.5 percent.

Major Precious Metals ETFs/Stocks

ETF

3-Month Performance (%)

12-Month Performance (%)

SPDR Gold Shares (GLD)

-4.1

-4.5

like iShares Silver Trust (SLV)

-7

-11

Freeport-McMoRan Copper and Gold ((NYSE:FCX))

-1.5

-10.5

What's in the cards for the new quarter?

Wall Street will face three challenges:

The first challenge is the state and the direction of the Big Picture, the U.S. and the world economies, most notably the employment situation in the U.S., which will set the pace for the different rounds of QE. A stronger employment report, for instance, would ignite fears of a Fed exiting QE, a negative factor for Wall Street, especially for precious metals that have been benefiting from the weaker dollar that usually follows each additional round of QE.

A stronger economy, however, is good for earnings. That's where the second challenge is. Would profit growth accelerate, as Main Street tries to catch up with Wall Street, giving another boost to equities toward new highs? So far, things do not seem to head in the right direction. Oracle's (NYSE:ORCL) revenues, for instance, dropped by 1.0 percent (yoy) and 1.6 percent sequentially, with the decline stretching across most of the world regions, consistent with reports from other U.S. multinationals. Federal Express (NYSE:FDX) and Caterpillar (NYSE:CAT) reported big sales, misses too, as was Red Hat (NYSE:RHT).

Wall Street's third and most serious challenge will come from the ongoing European bailouts, which have now touched depositors in addition to bondholders. So far, this new bailout model has been positive for U.S. equities and negative for precious metals, as another tsunami of money leaves Europe and heads for the U.S. - boosting the dollar against the euro and pushing U.S. equities to new highs. In the long-term, however, this sort of bailouts threatens the cohesion of the eurozone and the social stability of Europe, especially if bailouts touch small depositors - would there be any big depositors left to shoulder the bailout burden? That's why investors should always hedge their positions.

Source: 3 Things That Will Shape The Direction Of Wall Street In The New Quarter