Market Insider/Friday Look Ahead
CNBC Executive News Editor
Commodities and energy are likely to stay in the driver's seat Friday. Those were the power groups, and the financials were the weaklings again in Thursday's stock market.
Insurer AIG's bad earnings news may keep that trend going. AIG stock fell in the after hours Thursday after it said it lost $7.81 billion for the first quarter, on billions in charges and investment losses. The insurer also said it plans to raise $12.5 billion in new capital. Funny how its stock had been falling in the past two sessions ahead of that earnings (or loss) report.
Another financial stock in the news Friday will be Citigroup which hosts an investor day. Citigroup CEO Vikram Pandit is expected to detail his vision for Citi and its future as a financial services supermarket.
In Thursday's market, the dollar mostly wobbled as oil continued to bubble higher, setting a new high above $124. Gold rose 1 percent, rice surged and corn hit a new high. The Dow rose 52 points to 12,866; Nasdaq was up 12 and S&P 500 rose 5.
Of the S&P sectors, materials was the best performer, up 2.3, followed by energy, up 1.9 percent. For the week, materials is again a leader, up 3.5 percent and energy stocks are up 3.7 percent. Financials were lower, off 1.2 percent Thursday and down a big 5.4 percent for the week so far.
In economic news Friday, traders are watching the international trade data for March, due at 8:30 a.m.
Red Hot Commodities
Oil's more than 10 percent gusher in recent sessions is taking its toll on investors' psyches, if not stock prices.
"I think high oil prices are at a point where they are close to a tipping point, and they sow the seeds of their own destruction," said Morgan Stanley's David Darst who was at CNBC Thursday for his appearance on "Closing Bell." He said it would be senseless to try to pin point the top, but he says the high prices are at a level where they can cause significant economic impact, and ultimately oil will back down.
Darst, chief investment strategist, Global Wealth Management, said the current momentum trend means investors have to play defense and offense at the same time. He pointed out that the transports, typically hurt by energy, have risen 16 percent since the beginning of the year. He said a decline in energy would help those same stocks.
Darst says he follows the Baltic Dry Freight Index, a kind of mirror for commodities and transportation. The index measures shipping rates for raw materials, excluding energy. The index peaked at 10,000 before declining to 7,500 just before the Bear Stearns rescue. "I've been staggered by how it's recovered to 10,200," he said.
The rise in the index parallels the rising pressure on oil and other commodities and is driven by momentum. "It's like a super tanker," he said. It takes a while to turn around, but the slowdown of the U.S. consumer may ultimately be the brakes, he said.
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