Earnings from J.P. Morgan and some other big companies could sway the market's early direction, but traders are closely watching oil to see if it will make or break the upswing in stocks.
J.P. Morgan's earnings are expected before the bell, and Merrill Lynch's results come after the close. The financials Wednesday scored huge gains on the back of Wells Fargo's solid earnings report and dividend increase, but it was the move in oil that got the most credit for propelling equities.
Oil slumped $4.14 or 3 percent per barrel to $134.60, giving it a two day decline of more than 7 percent. That move helped ignite a stock rally that took the Dow up 276 points or 2.5 percent to 11,239 and the S&P 500 jumped 30 or 2.5 percent to 1245.
The big debate on the street is whether this decline is a real reversal or just another trading event, like last week's drop in oil.
"The fact that it nearly reached $150 was part of its undoing," said CNBC's Rick Santelli. "Other factors are pressuring it, including options expirations Thursday and futures expirations next week."
Santelli said a psychological factor was President Bush's elimination of an executive ban on offshore drilling earlier this week, even though it does not yet change the status quo and would take years for results.
Santelli says he does not necessarily see this move down as a turning point. "You can't undo five years in two days," he said of the momentum in energy markets.
Housing starts are reported at 8:30 a.m., and weekly jobless claims are reported at 8:30 a.m. The Philadelphia Fed survey is reported at 10 a.m.
Thursday is a major earnings day. Coca-Cola, Nokia, BlackRock and United Technologies report before the bell, along with dozens of other companies. In the after hours, we'll hear from big tech - Google, Microsoft and IBM.