Market Insider

Thursday's markets will be quiet, but there are a few important undercurrents investors are watching.

Energy and stock traders alike are tracking the approach of Tropical Storm Gustav as it pumps up energy prices ahead of its turn towards the Gulf of Mexico. There is also weekly jobless data, second quarter GDP and a few earnings of note. Toyota holds a briefing on its annual business plan overnight New York time, and Tiffany and Sears report before the bell. Dell reports after the close.

Fannie Mae

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[FNM  Loading...      ()   ] and Freddie Mac

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[FRE  Loading...      ()   ] will probably stay in the spotlight. The two mortgage giants scored double digit gains during Wednesday's session as traders continued to debate the likelihood of a government bailout, amid speculation that perhaps equity investors will not be wiped out.

After the bell,  Fannie Mae announced a management shakeup which included the departure of if its Chief Financial Officer Stephen Swad and Chief Risk Officer Enrico Dellavecchia.  Swad was replaced by Fannie Controller David Hisey as part of a series of internal management moves. Fannie stock slid on that news.

Econorama

Jobless claims are expected to come in at 425,000 when they are reported at 8:30. "It would help stocks if they're lower," said BMO Capital Global FX Market Strategist Andrew Busch. He said the second quarter GDP, also reported at 8:30 a.m. will probably be a non event. It is expected to show a gain of 2.7 percent.

But third quarter GDP, he says, could start to look better than expected. He pointed to Wednesday's July durable goods report which showed a better-than-expected rise of 1.3 percent. "I'm looking for 1.5 percent growth for the third quarter," said Busch. "I expect U.S. exports to do quite well."

The dollar slipped a bit against the euro Wednesday, but Busch said it is like the one soldier among world currencies standing ready for battle. "We are still in the global economic race to the bottom which the dollar has won," he said. He said the stronger GDP should be a dollar positive.

The Dow was up 89.64 points or 0.8 percent to 11,502.51, while the S&P 500 was up 10.15 points, or 0.8 percent at 1281.66. Nasdaq rose 20.40 to 2382.46. The S&P financial sector was the best performer, gaining 1.7 percent. The energy sector was up 1.2 percent , and refiners like Sunoco and Valero led the gains.

Oil Drill

Oil, gasoline and natural gas moved higher as Gustav chugged toward the Gulf of Mexico, weakened after its trek across Haiti. Weather forecasters expect it to return to hurricane strength before it enters the Gulf's warm waters. It is expected to make landfall Monday, and as of Wednesday, it was most likely aiming for Louisiana, after crossing much of the energy production infrastructure of the Gulf of Mexico.

Oil

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[US@CL.1  Loading...      ()   ] rose $1.88 per barrel or 1.6 percent to $118.15 a barrel on the NYMEX. Natural gas was up 1.4 percent at $8.394 a million British thermal units. Weekly natural gas inventory data is reported Thursday at 8:30 a.m.

Traders say this is the first test of the upgrades made by energy companies after Hurricanes Ivan, Katrina and Rita wreaked havoc with pipelines and platforms. Rig owners have improved anchoring and mooring systems.

Sticking Point

The fate of Fannie and Freddie remain an obstacle for stocks, and few market participants we talk to about them claim to have an answer. Fannie's management changes were met with a tepid response and some skepticism about its move to replace executives from within existing ranks.

"This is a step in the right direction in the sense that anything that actually helps management gain credibility with investors, who have been time and and again hurt by these companies, is a step in the right direction. Is it too late? I think ultimately, it probably will prove too late. The damage is done," said analyst Josh Rosner of Graham Fisher and Co in an appearance on "Fast Money."

"I think it actually does little more than show that they recognize they need to shake up management. I'm not sure it's the right management shakeup that we're seeing," he said. "If it doesn't work and the companies aren't able to gain greater confidence with the street, we'll end up seeing all of management replaced if the new regulator or Treasury has to get more involved."

Questions?  Comments?