Market Insider: Thursday Look Ahead
The painful selling in stocks has been so consistent this week, it's no surprise that some traders say the market could test October's lows before the week is over.
Intel's after-the-bell warning Wednesday will pressure tech names and the broader market Thursday morning. Intel says its fourth quarter business is below expectations, and its revenues are now expected to be $9 billion, more than 10 percent lower than expected. The warning sends ripples through tech but also raises concerns about business spending, a big driver of the economy.
Art Cashin of UBS says Thursday and Friday will be critical days for the market, and there could be a major move by the weekend.
- Recession or Depression? Finding the Trigger ...
- Pros Say: Earnings Estimates to Fall 50% in 2009
- The Difference Between Good Debt and Bad Debt
- 'Now Is the Time' to Shop Fire Sales
Cashin, UBS director of floor operations, wrote in his daily note Wednesday: "Markets remain nervous and range-bound. Since the 10/10 lows, they are trading a semi-rectangular pattern (the rectangle's altitude is compressing). It all hints that we're building to something major. Lots of fingers, cycles and models zero in on Thursday and Friday."
On Wednesday afternoon, as the stock market headed into the final minutes of trading, Cashin said in a phone interview that those two days are key for lots of reasons. "Even the stargazers got into the act," he said. Will stocks test the lows this week? "It's setting up for that. The last two days of the week are target days," he said.
One reason for selling pressure in the market is the real and feared redemptions from hedge funds. Saturday is the date by which investors in many hedge funds must decide whether they want to withdraw funds at year end.
Thursday Look Ahead
On Thursday, weekly jobless claims data and international trade are reported at 8:30 a.m.
A major earnings report from Wal-Martis expected before the bell. Retailers Kohl's and Nordstrom also report. Traders will be watching those retailers closely after negative comments from Best Buy and Macy'son Wednesday.
Stocks lost about 5 percent Wednesday, with the S&P 500 down 46 points to 852.30 and the Dow tumbling 411 points to 8,282. Traders point to the negative forecast from Best Buy for helping add fuel to the sell off. Best Buy says its sales will be down, and this is the most difficult environment it's ever seen. Those comments weren't the only factor though.
Treasury Secretary Hank Paulson spooked the market when he discussed the $700 billion Treasury Asset Relief Program. He said that the TARP's mission changed by the time it got Congressional approval.It turned into an instrument to inject capital into banks rather than to purchase distressed assets. Traders said those comments, while not unexpected, weighed on confidence.
Paulson also said autos would not qualify for the TARP, but Rep. Barney Frank, D-Mass. said Congress would discuss a new bailout for auto makers next week. The threatened failure of one or more of the big three has been a drag on the market.
The dollar continued its rally against the euro, as commodities and energy continued to move lower. Oil tumbled another 5.3 percent or $3.17 per barrel to $56.16. Stock traders say the lack of buying in oil has also been weighing on market psychology. They see the decline in crude as a vote that the global economy is losing steam at a rapid pace.
The dollar was at $1.2480 per euro, up 0.4 percent on the day.
Scott Redler of T3Capital.com is one who thinks stocks could test October lows very shortly. The Oct. 10 intraday lows of 7,882 on the Dow and 839.80 on the S&P 500 are the levels to watch.
"Last time we were down here when the Dow was at 8,143... basically there wasn't enough weakness for it to test the lows and break the lows. We then had the election rally, and the shorts had to cover," said Redler.
More From CNBC.com ...
"If we pierce the intraday lows, some people who have stocks that are already in pain can't hold onto them. That's where they have to sell because they don't know if we're going to go to 7,600, 7,300, or 7,100. That's when the loose hands have to give up and throw in the towel. By breaking the lows and having that cascading effect, that cleans out that last level of investors that just cannot hold onto stocks. They keep selling every time we're up just to clean up their positions," said Redler.
How Cheap is Cheap
In the latest wipeout, some stocks are getting to levels that traders can't help but point out for the sheer shock value. One of those on Wednesday was Citicorp , which broke below $10. Google was another. Just less than a year after it soared over $700, it was trading below $300, a level it hasn't seen since 2005.
What Else to Watch
Philadelphia Fed President Charles Plosser speaks on the economy at 12 p.m., and Minneapolis Fed President Gary Stern is expected to speak at 2 p.m.
Investors can also watch as hedge funds are dragged before the House Oversight Committee which will hear from some heavyweights of the industry including John Paulson, Ken Griffin and George Soros, plus a panel of academics.
Questions? Comments? email@example.com