Thursday's chain store sales numbers could set the tone for a market obsessed with the weakening economy.
The October sales reports from retailers are expected to show steep declines - the impact of an American consumer that has gone on a spending strike. Weekly jobless claims data is also released ahead of the open, at 8:30 a.m. as are productivity and costs.
Thomson Reuters expects its chain store sales index to decline by 0.3 percent for October, the lowest level in its eight year history. Department stores are expected to see an overall drop of 10.9 percent. Teen apparel is expected to be off by 5.6 percent, but discounters are expected to be up 1.4 percent. Widely watched Wal-mart is expected to report a sales gain of 1.6 percent.
Another factor that could weigh on stocks was Cisco's disappointing earnings comment. Cisco said that its revenues could fall as much as 10 percent in the current quarter as the economic slowdown spreads through Europe and Asia. Its stock fell in the after hours session Wednesday.
Earnings reports of interest Thursday include Toyota, Blackstone, AutoNation, Nasdaq OMX, PG&E, Williams Cos, Dynegy, Constellation Energy, El Paso and Teva.
The Dow Wednesday fell 486, or 5 percent to 9139, its 12th biggest drop in history and its worst post election day decline ever. The S&P 500 lost 52.98 points, or 5.3 percent to 952.77. Financial stocks were down nearly 9 percent. They were weaker all day but added to losses after Oppenheimer analyst Meredith Whitney said on "Closing Bell" that bank revenues could be 30 to 70 percent lower than Wall Street expects.
There was no sign of a post election relief rally, which led traders to say it happened on election day when stocks gained more than 3 percent. That rally, one trader said, "was a dead cat bounce in a bear market."
Treasuries rose Wednesday, lowering the yield on the 10-year to 3.692 percent and the two-year to 1.364 percent. The dollar rose 0.64 percent against the euro but fell 1.58 percent against the yen.
Important for currency markets tomorrow are interest rate meetings by the European Central Bank and the Bank of England ahead of the U.S. open. Marc Chandler, chief currency strategist at Brown Brothers Harriman said he expects both to cut rates.
Central Bank Meetings
- Euro Rate Expected to Be Slashed by Half a Point
- Bank of England Could Keep Cutting to 0%
- More Big Rate Cuts to Come?
- Euro May Drop Further, Even Hit $1.18: Analyst
"The ECB is the least likely to surprise us," he said. "The market feels very confident of 50 basis points." But the Bank of England is a wild card and sometimes surprises the market. Chandler said they may actually make a 75 bps cut, deeper than the 50 bps some analysts expect.
Chandler said the dollar will continue to keep to its upward trend for now. "Bottom line, the process of deleveraging is not over, and that's the major force lifting the dollar. When you get a decent rally in the euro, they sell into it ... We're still in the consolidation phase. It seems that the supports for the dollar are stronger than resistance. That means the dollar should get stronger. People still want to buy dollar dips more than they want to sell rallies."
He also said the credit markets are still leading. "Despite the 19th and 20th day of money market rates falling, the stock market got clobbered," he said. He likened the money markets to a patient with a fever. "The fever was brought down, but they're still sick. They had a fever and they've been force fed."
That's the latest buzz word in Washington and on Wall Street, particularly now that the election is over, and Illinois Sen. Barack Obama is headed for the White House. House Speaker Nancy Pelosi Wednesday said she hopes Congress will return this month to approve new spending measures to help the economy. There's a lot of talk that those measures should include infrastructure spending.
Oil slumped $5.23 per barrel, or 7.4 percent to $65.30 Wednesday. That kind of downward move feeds the argument that alternative energy will not be as important as it might have been when oil was above $100.
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But Cambridge Research Energy Chairman Dan Yergin said we may see "green" stimulus from Washington.
"It's agenda-setting time in Washington," Yergin wrote to me. "Right at the top is a 'green stimulus program,' and ... it's likely to get a lot more attention now that the election is over. This brings together the drive for a new economic recovery program combined with the strong commitment of the Obama campaign to green energy and the new President's overall emphasis on energy.
"It would be aimed both at greater energy efficiency and renewables, and there is much focus on the job-creating potential, both in new technologies and in making buildings more efficient. The mechanisms are less clear given the budgetary constraints. But the emerging slowdown in the the deployment of renewables, because of the drying up of credit and finance, will add to the fuel for a green stimulus program."
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