Market Insider/Wednesday Look Ahead
Inflation and retail sales data, plus a speech from Fed Chairman Ben Bernanke are the big before-the-bell events that could sway market direction Wednesday.
Tuesday's big bounce up started with good earnings news from Wal-mart , but got a major push when Goldman Sachs CEO Lloyd Blankfein said Goldman will not take a credit-related writedown this quarter. Although Goldman has firmly made that same comment several times, Blankfein's pronouncement before a Merrill Lynch financial services conference was a big boost for investor confidence in not only Goldman, but the financial services group and the stock market.
J.P. Morgan CEO Jamie Dimon added to the euphoria with his comments that exposure to collateralized debt obligations aren't a significant negative for the bank. Morgan Stanley's incoming CFO Colm Kelleher says he sees more trouble out there but that the firm is comfortable with its positions. Goldman Sachs rose 8.5%; Merrill Lynch shares rose 7%; Citigroup nearly 7% and Bank of America was up nearly 6%. Morgan Stanley rose nearly 4%.
Fear that the financial services sector is vulnerable to more subprime-related credit exposure has added to volatility and depressed the stocks. The fear has also spread across the market, rattling confidence in even the healthiest sectors. For instance, in recent sessions technology stocks, the last stalwart's of the market, sold off in dramatic fashion with a more than 8% decline in the Nasdaq in the past week.
On Tuesday, the pummeled Nasdaq jumped 89 points or 3.46%. The Dow soared 319 points or 2.46% to 13,307 and the S&P 500 climbed 41 or 2.91%. Apple shares snapped back more than 10% Tuesday after a 7% decline Monday.
Falling oil prices also helped sentiment. Crude was off $3.45 per barrel or 3.7% to $91.17 per barrel, in its biggest dollar drop since December 2004. Important to watch will be whether the energy market continues to perceive that global oil demand will not justify the super high prices of recent weeks.
On Wednesday, investors will get a look at inflation data in the form of producer prices. (Thursday is consumer prices) The consensus is for a 0.4% increase in PPI. Retail sales for October are expected to come in with a 0.2% increase, compared to September's 0.6% gain.
"I think the data trumps Bernanke because he' s going to pay lip service to inflation," said CNBC's Rick Santelli. Bernanke is expected to stick to the Fed's latest script -- a rate hike is not guaranteed and the Fed will be vigilant in its fight against inflation.
Bernanke speaks at an annual Cato Institute event. He will be giving the keynote speech at 9:10 a.m. and then follow up with a question and answer session, around the time the market opens. His topic is FOMC communications.
Later in the morning, SEC Chairman Christopher Cox speaks before the Senate Banking Committee at a hearing on proxy access and shareholders rights.
Also in Washington, Warren Buffett and three others testify before the Senate Finance committee hearing on estate taxes. CNBC.com will live blog the testimony
The Merrill Lynch financial services conference continues in New York. E-trade's CEO had been on the agenda but canceled his appearance.
In Los Angeles, CNBC's Phil Lebeau will be attending the LA Auto Show.
Earnings of interest Wednesday morning include Macy's and Arcelor Mittal. Applied Materials reports after the bell. (Get all your earning's numbers here).
During "The Call," I asked Dylan Ratigan what he thought of the market's wild move up and the astronomical pops in some stocks after recent down days and he told me it was momentum and emotion. So I found interesting the comments of Neil Hennessy, president and fund manager of Hennessy Focus 30, when he was interviewed by Bill Griffeth on "Power Lunch."
"We've removed emotion from the way we invest, and what's happening in the marketplace today is there's so much emotion that's going on ... not only on a daily basis but on an hourly basis and almost a minute-by-minute basis," said Hennessy. "... If people would just take a step back and look at what actually is happening out there, their fears should really not be there."
"If you look at the subprime market ... one of the things I look at is if you don't think there's NOT going to be more writedowns in the future, you're crazy. There will be," he said. "... Because anybody that's going to follow (former Merrill CEO Stan) O'Neal or going to follow (former Citigroup CEO Chuck) Prince ... if I was going to take that position, the first thing I'd want is everything on my desk that is bad so I could get it off the books, so I don't own it in the next six months. This too will pass," he said. "Look at the economy, it is in great shape."
So after watching tech stocks begin to yo yo back up, I phoned Eckhart and Co managing director Peter Costa, who clairvoyantly commented on techs back on Oct. 25. He told me at the time that they were close to topping. How was he today when the market was soaring?
"Tech stocks look like they're rebounding a little, but I'm still not convinced," said Costa from the NYSE. "I don't think we're going to hold this level ... I'm still thinking this market has some downside, maybe two to three percent."
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