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Headwinds still blowing for stocks as traders await US data

What Ottawa & oil mean for market
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What Ottawa & oil mean for market

U.S. markets are focused on earnings and jobless claims this morning after surprise improvement in euro zone manufacturing helped lift stock futures.

But European stocks moved lower. Euro zone PMI was 52.2 in October, up from 52 in September. China manufacturing data, however, came in weak and the HSBC flash manufacturing PMI rose to a 3 month high but factory output fell to a five month low.

Strategists said stocks could continue a pattern of consolidation Thursday, after the massive spring back rally earlier in the week.

The Dow slumped 153 points, to 16,461, and the was off 14 at 1,927.

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Canally said the markets should turn their focus overnight to PMI data, expected for China, Europe and the U.S. Thursday. For the U.S., "it's the ISM 10 days early and I think it's going to tick down a little bit," he said.

MacNeil Curry, Bank of America Merrill Lynch global head of technical strategy, said he is watching the 1,943/44 level for possible resistance on the upside.

Curry said during the Tuesday surge up volume was 80 percent, a constructive sign.

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A transmission for a Chrysler Ram 1500 truck goes through the assembly line at the Warren Truck Assembly Plant in Warren, Mich.
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"You're seeing some divergences so you can consolidate around here. Maybe next week, it retests the 200-day around 1,907. You still have to be a buyer. It's still going higher. You have good seasonality into year end," Curry said.

He said volume was consistent with capitulation when the market pulled back last week and the subsequent strong rally and decline in the VIX were a good sign.

"It all says you have to be bullish, but you could still see a pullback," Curry said.

Read MoreOil drop another issue for the stock market

West Texas Intermediate fell $1.97, to $80.52 per barrel, its lowest close since June, 2012. The government's inventory report showed crude inventories rose 7.1 million barrels in the last week, well above the expected 2.8 million barrels.

Treasurys sold off after consumer inflation data Wednesday, which was not as negative as expected. CPI was up 0.1 percent rather than flat. The 10-year yield rose to 2.25 percent, a one-week high.

"We have weekly jobless claims which could be important because last week we had that 264,000, which was the lowest we had since 2000," said Arthur Burns, co-head of Financial Futures and Options in New York for Societe Generale/Newedge. He noted the four-week average at 283,500 has been moving lower and is a positive sign for job creation.

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"We don't really have any macro-economic numbers coming for the next couple of days, other than the jobless claims number. I think the attention is going to be on next week's Fed meeting. There was a disconnect between the statement from the last meeting, (Fed Chair Janet) Yellen's press conference. Then the minutes came out, and they were interpreted as more dovish," he said.

Jobless claims are released at 8:30 a.m. EDT, and leading indicators are released at 10 a.m.

Earnings expected before the bell include: Caterpillar, MMM, General Motors, Raytheon, Untied Continental, Alaska Air, Southwest Air, JetBlue, American Airlines Group, Union Pacific, Comcast (CNBC's parent company), Eli Lilly, Royal Caribbean, Under Armour, Celgene, Dunkin' Brands, Pulte Group, Credit Suisse, Dr. Pepper Snapple, Imax and Brunswick.

Microsoft and Amazon.com report after the close, as does Altera, Juniper Networks, Southwestern Energy, Flowserve, Biomarin Pharma, Altera, Cerner, DeVry and Decker's Outdoor.