Market Insider/Friday Look Ahead
Wall Street has little to look for in terms of economic data Friday, but there could be spillover from Thursday's scaredy-cat markets.
There is an important speech on the economic outlook by Federal Reserve Governor Randall Kroszner's before the opening bell. He speaks at the Institute of International Finance's conference in New York.
Industrial production and capacity utilization data is released at 9:15 a.m. Treasury data on international capital flows is released at 9 a.m. and it should show how much the weakened dollar is impacting foreign investment in U.S. securities.
Thursday's after-the-bell earnings dumped more bad news on the market. Retailer Kohl's joined J.C. Penney in warning that the current quarter is more challenging than previously thought and said same store sales could fall as much as 2% in the fourth quarter. Kohl's president said the holiday season will be "very promotional."
Starbucks' earnings comments also flashed a warning about the consumer's willingness to spend in the next couple of months.
The coffee vendor saw its stock fall 5% in the after hours on lowered guidance for fiscal first quarter and 2008. Starbucks chief financial officer Pete Bocian said, "Given the current economic environment, and the commodity costs that are not expected to ease until the latter part of the year, we expect EPS (earnings per share) expansion to be greater in the second half of fiscal 2008." Starbucks fiscal fourth quarter profits rose 35% to $158.5 million.
Starbucks launches its first national television advertising campaign Friday. Earnings reports are due Friday from Agilent and Autodesk .
You can see the fear running across the markets. The symptoms started to return after Tuesday's overly enthusiastic, 319-point Dow ramp up and by Thursday afternoon, any even slightly negative headline caused handwringing.
There was rabid selling in the financial stocks, buying of Treasuries and money just looking for a safety zone. The Dow closed 120 points lower and the Nasdaq was off 25, nearly a percent on Thursday. The S&P financial sector was down 3% and energy was 2.3% lower. What was up? Just those dividend paying utilities, up 0.13%.
The yield on two-year and 10-year Treasuries fell to February, 2005 lows. Gold slumped $27.10 or 3.3% per troy ounce to $785.90, as the yen gained nearly a percent against the dollar. Traders said those moves reflected an unwinding of the so-called "carry trade," where investors used cheap yen to buy commodities and other assets.
Oil slipped $0.66 per barrel Thursday to $93.43. Crude has lost 1.2% since the beginning of the month, but it is up 53% for the year. On Friday, oil and finance ministers from OPEC member countries will meet in Riyadh ahead of the OPEC ministerial symposium on the weekend.
Cambridge Energy Research Chairman Dan Yergin was a speaker there on Thursday. OPEC is not expected to discuss production at this week's meeting. It is instead tackling other topics, and one of those is global warming. "The most striking thing at this symposium has been focus on climate change, not to debate it but talking about how to deal head on with carbon and how to find the technologies to solve the problem," said Yergin, a CNBC contributor.
"The other thing that came through so clearly is how integrated now the oil markets and the financial markets have become, and the kind of volatility we've seen this year shows we're in a new phase, and I think everybody is trying to figure it out,'" he said in an interview from Saudi Arabia. Yergin will report more from the meetings when he appears on "The Call" Friday.
CNBC's Rick Santelli said it was a confluence of factors that contributed to Thursday's jittery markets, and it started overnight in London. New data showed rising inflation in Europe, and the Bank of England issued a gloomy economic outlook. Not helping was the warning from Bank of England's governor Mervyn King, Wednesday, that stock markets around the world could be in for a fall and this could hurt the global economy.
Santelli said there's some market talk that market volatility may be the result of traders trying to get "ahead of the rush" on the year end turn, or the rolling over of positions ahead of the new year.
Santelli also said comments Thursday morning from Vanguard founder John Bogle caused some nervousness among traders. Bogle said on "Squawk Box" that there's a 75% chance of a recession and he says it would be the result of the consumer losing confidence. (read more of Bogle's comments in Thursday's posting) In our informal Marketinsider survey, 61% of some 200 readers agreed with Bogle!
On that note, we'll repeat a comment Bogle made about investing Thursday morning. "A diversified investor with a bond position should just ride it out. In the long run, I think a bond position and the growth of American business will bail you out," he told "Squawk Box."
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