Some important earnings reports will also be released ahead of the bell, including Citigroup and Caterpillar. Citigroup should continue showing damage from the credit crunch, and Caterpillar is a likely beneficiary of the weak dollar. Its CEO James Owen will appear on Street Signs at 2 p.m. Honeywell, Schlumberger, Xerox and Manpower also report.
There's no economic data of note Friday.
Thursday's market was sluggish, moving early in reaction to mixed earnings news. We had expected a "decent" day for stocks, and after Wednesday's big run up it was decent -- not good, not bad, just decent. The Dow was up a scant 1.2 points, while the S&P 500 scratched out a 0.8 point gain. The Nasdaq though was lower, losing 8.3 points on the day.
The dollar rose 0.46 percent against the euro, taking it to $1.5882, and it rose 0.85 percent against the yen. Oil fell 7 cents to $114.86, but not before setting a new trading high of $115.07 per barrel.
"I think the market was kind of reined in by tomorrow's (triple) expiration day, given the volatile trading we've had with everybody trying to sort through the earnings pictures. You've got Citi coming out tomorrow," said Art Cashin, director of floor operations for UBS in a phone interview Thursday.
"I think that people kind of stayed on a short tether today. The range of the market was not very big. They shrugged off the Philly Fed number, which was a little worse than people thought it was. Nobody wanted to risk a large short position," he said.
Cashin said so far the earnings outlooks are not bad. Cashin said one thing stock traders are keeping a wary eye on is the bond market. "Over here in the stock market the sun is shining and the picnic is about to begin, and in the bond market they're nailing plywood to the windows. These spreads are way out from where they should be," he said.
The fall in two year Treasurys began in the morning after the three month London interbank offered rate surged. Treasurys fell, with the 10 year yielding rising to 3.729 percent and the 2-year rising to 2.111 percent.
Cashin also mentioned the shifting view in the markets about the Fed as fears about inflation build. The markets now expect less aggressive rate action by the Fed, and this view is not only in the Fed funds futures but in the attitude of traders.
"Certainly the stock guys, who are not the most knowledgeable in the area are looking for a 25 basis point cut and then a stop," he said. "They got a scare out of the PPI (producer inflation data) and they want to get out of aggressive rate cuts."
Fed speakers Thursday were pretty clear about inflation concerns. Richmond Fed President Richard Lacker said inflation is a problem, and it's too high. Meanwhile, Dallas Fed President Richard Fisher said trying to solve the financial industry's structural problems with more interest rate cuts will only worsen the situation by spurring inflation.
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