Market Insider/Thursday Look Ahead
There's little chance Fed Chairman Ben Bernanke will say much to soothe the markets when he speaks on the economy Thursday afternoon.
But regardless, his comments at 1 p.m. are likely to be among the most important headlines of the day and could be a big driver for markets. Bernanke speaks on the financial markets, the economic outlook and monetary policy at a time when the markets are thick with rumors that the Fed could cut rates even before its next scheduled meeting.
You can be sure Bernanke won't comment on that, but those rumors are swirling against the backdrop of ever increasing recession chatter on Wall Street. On Wednesday, Goldman Sachs joined the ranks of firms that expect the economy to fall into a recession this year. Goldman's economists though expect the Fed to be aggressive with rate cuts, and also anticipate some fiscal stimulus from Washington this year.
Other news to watch Thursday includes chain store sales reports for December. These comments from retailers will be watched as the final verdict on the holiday shopping season.
"It'll probably be a tough morning for them (retail stocks)" because of all the downward revisions, said Eckhart and Co managing director Peter Costa from the NYSE Wednesday afternoon.
There are also a few data points to watch Thursday morning including 8:30 a.m. weekly jobless claims. (See Econorama below)
Bernanke speaks before the Women in Housing and Finance and the Exchequer Club in Washington. He will take questions after his speech. At the same time, Kansas City Fed President Thomas Hoenig speaks in Kansas City about the economic outlook.
Up, Up and Away
Stocks Wednesday staged a fairly decent rally late in the day and the financials, just as they were in Tuesday's selloff, were a focal point of the market's volatility. The strongest Standard and Poor's sector was information technology, up 2.2 percent, then financials, up 1.7 percent. The Dow finished up 146, or 1.2 percent, to 12,735. The S&P 500 was up 18.94, or 1.4 percent to 1409, and the Nasdaq rose 34 points or 1.4 percent on that big lift in technology stocks.
Rate cut rumors were not the only things heard around the edges of the market as stocks rose, fell, rose and rose even more as shorts rushed to cover some positions. Firms like Merrill Lynch and Bear Stearns were up sharply and there were various rumors about writedowns, both positive and negative, surrounding the group. But Bear Stearns new CEO Alan Schwartz eased some of the angst in an interview with David Faber. He said the firm expects no more writedowns and does not need to raise more capital.
Schwartz says he is comfortable with Bear's positions and said it is out of some of its riskiest assets. "Some of the great opportunities in the next five years are going to be created out of this credit crisis, as they always are, and as long as we are positioned for that, I'm going to be very confident," he said.
Meanwhile, bond insurers were also in the spotlight. MBIA was under pressure again as the company unveiled a plan to boost its capital by slashing its dividend and selling $1 billion in debt. But one of the most interesting bits of news of the day may have been a comment Ajit Jains, who runs Berkshire Hathaway's insurance business.
Jains said on "Street Signs" that while he is building up the bond insurance business for Berkshire, he may also be interested in doing a deal with companies already in the business. He said he is "talking to them now." Berkshire Hathaway Assurance had announced its first coverage, backing a $10 million bond issued by New York City Tuesday.
"This is one small step. At this point, we'd like to have more full bites at the apple. If we can get comfortable with trying to assess the exposure that the existing players have, and if they're looking for us to partner up with them, I certainly don't want to rule out that possibility, as well," said Jains.
Coincidentally, CNBC's Rick Santelli points out that MBIA's credit defaults reached distressed levels in the afternoon but rebounded, leading some traders to speculate there was capitulation at the same time the stock market soared. Some traders also credited Jain's comments for the dramatic move up in stocks
Other financial companies in the news include Countrywide Financial . The stock, plagued by bankruptcy rumors Tuesday, continued to decline Wednesday after it said delinquency rates of loans in its portfolio rose in December. It said 6.96 percent of the loans in its servicing portfolio were delinquent, up from 5 percent the year earlier.
And finally, the first big earnings report of the quarter, Alcoa, was a positive. The company beat estimates and saw its stock rise in late trading. Alcoa earned $632 million in the fourth quarter, or $0.75 per share, up from $359 million, or $0.41 per share the year earlier.
Red Hot Metals
Gold continued its rise into record territory, closing at a new high of $879.50 per troy ounce, up $1.50. Silver was also on a tear, hitting a 27-year high of $15.734 per ounce. Interesting to note, Dennis Gartman of the Gartman Letter said on "Squawk Box" Wednesday that he was selling half his gold position because there is too much media hype surrounding the metal's runup. Gartman has been a big gold bull, and he now expects prices to dip into the lower $800 per ounce range. Still, he likes the metal and is holding onto that other half.
Comments from St. Louis Fed President William Poole gave a lift to the dollar. He said it is too soon to tell whether housing will push the economy into a recession. The dollar ended the session at $1.4668, up 0.3 percent against the euro. It was also stronger against the yen, rising 0.8 percent.
Oil fell $0.66 to $95.67 per barrel. Treasurys saw yields fall again. There was buying in Treasurys amidst all the recession talk. The 10-year saw its yield slide to 3.790 percent, its lowest level since March, 2004.
0700 Bank of England Announcement on Rates
0745 European Central Bank Announcement on Rates
0830 Initial Jobless Claims, expected 340,000, previous 336,000
1000 November Wholesale Inventories, expected +0.4 percent
1030 Natural Gas Inventories
1300 U.S. Treasury's TIPS Auction Results
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