Market Insider/Friday Look Ahead
Consumer inflation data is the big headline to watch Friday.
But after Thursday's somersault volatility, other areas to watch Friday will be the behavior of credit markets, the incredible shrinking dollar and rising oil prices. Traders say it is also key to watch how stocks close ahead of the weekend, after Tuesday's big move up reaffirmed for some that stocks may have found a double bottom.
The CPI is expected to come in at 0.2 percent, when it is reported at 8:30am ET. Consumer sentiment is reported at 10am.
Fed Chairman Ben Bernanke speaks at 1pm ET, at a conference in Washington on "sustainable homeownership." He will not take questions. CNBC's Larry Kudlow interviews President Bush Friday.
As the dollar continues to wilt, oil set yet another new record Thursday, finishing at $110.33 per barrel, up 0.4 percent. Oil hit a high of $111 in the late electronic session. Gasoline fell 4.58 cents per gallon or 1.7 percent to $2.6828 per gallon on the Nymex.
Oil keeps rising , but gasoline not as much. What gives? I asked John Kilduff, senior vice president at M.F. Global.
"I do think $3.50 is going to to be the new national average," said Kilduff, a CNBC contributor. "It shouldn't get much higher than that. I'm not in the $4 dollar camp. I just don't see it. The gasoline supply fundamentals are proving to be limiting factors keeping gasoline from going hyperbolic along with the rest of the complex."
Earlier this week, the Energy Information Administration said retail gasoline pump prices are likely to top out at $3.48 per gallon nationally this summer, but some markets could see $4 per gallon prices. Pump prices now average $3.225 per gallon.
"You see gasoline continue to flag negative to the rest of the complex almost on a daily basis. It doesn't go up as much as crude and heating oil and, in fact, today it is negative. It's reflective of rising prices and declining demand, and a very high amount of gasoline is in storage right now, near 15 year highs," said Kilduff.
Refiners are getting crushed in the trend, as rising oil prices pressures their margins.
Kilduff says gasoline will continue to follow oil higher, though, and he has revised his target on crude from $108 to $110 per barrel to $120 to $125 per barrel. "Unless and until the dollar policy changes, energy prices are going to soar," he said.
"If the dollar breaks down, the you're certainly going to see my price target realized," he said.
"What we're seeing is investors of all stripes piling into the commodities sector. Hard assets represent an inflation haven, a safety haven, and a value haven," he said.
Stocks Rock 'n Roll
The Dow, after sinking more than 200 points, rebounded Thursday to close 35 higher at 12,145. The S&P 500 jumped 6 to 1315, and the Nasdaq was up 19 at 2263.
Stock traders said a comment from S&P in the late morning -- that the credit crisis is making progress -- helped turn stocks higher. S&P said the write-downs for financial institutions are past the halfway mark and could total about $285 billion. The market had been pounded by worries about the troubles at Carlyle Capital, which defaulted on about $16 billion, could spread.
The financials were clobbered in early trading but some stocks in the group turned higher, taking the sector to a 0.34 percent gain. Bear Stearns was down 7.4 percent as rumors continue to swirl around the firm despite its denials of liquidity problems. The best performers were materials stocks, up 2 percent, then energy stocks, 1.4 percent higher.
"My impression of what turned the markets is that we had the first Senate vote on the extension of middle class tax cuts," said CNBC's Rick Santelli, from his perch in the Chicago futures pit.
Santelli also mentioned that some changes are coming overnight for futures markets. "As of midnight, almost every futures market in the world is changing margin requirements," he said. For instance, a $100,000 futures on the 10-year note would require a margin investment of $1,890, up from $1,620.
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