December sales reports from the nation's chain stores could send a chill through an already shaky stock market Thursday.
The monthly sales results from retailers, mostly released ahead of the opening bell, should show how the holiday shopping season wrapped up and whether there's any signs of pick up that traders are hoping for. "If it looks like nothing has changed, then this (market's) not turning around," said Art Cashin, director of floor operations at UBS.
"It looked like the consumer hit an absolute brick wall. The question is: Did that change? Was there any loosening up?" he said.
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Wednesday's stock market took a fright from the early morning release of ADP's private sector jobs data, which showed a worse-than-expected decline of 693,000 jobs in December. The data is not often indicative of the government's number, expected Friday, but ADP said it changed its methodology. Traders are now geared for a worse than expected number.
Weekly jobless claims, reported Thursday at 8:30 a.m., are expected to come in at 545,000. The market though is waiting for the big number of the week -- the December employment report. It is expected to show a loss of more than 500,000 jobs in November and unemployment at 7 percent, but economists have been raising their forecasts in recent days and now some expect losses of 600,000 and higher.
The Dow fell 245 points, or 2.7 percent Wednesday, to close at 8769. The S&P 500 fell 3 percent to 906. "I'm going to keep the caution flag up now. If we go through that (S&P ) 900 level, we'll have other things to look at," said Cashin.
T3Live.com's Scott Redler said the market looked overbought Wednesday and investors took profits after the New Year's rally. He said it would be bullish if the S&P can hold the 885 to 895 level, but if it falls below 850-860, there will be talk of a retest of the lows.
Another trader said funds and other institutions sold as stocks accelerated their decline late in the day. "Where's the Obama rally?" he said. A lot of traders have been hoping the market will hold up and gain some traction through the inauguration Jan. 20, but Wednesday's trading discouraged that view.
News of layoffs and restructuring from Alcoa and earnings warnings from Intel and Time Warner added to the negative tone. Traders fear the market will be hit by a wave of disappointing earnings and economic news at the same time investors attempt to find positives in some of the stimulus news and changes in Washington.
Investors will also continue to focus on the efforts of the incoming Obama Administration to develop a plan to battle the economic downturn and jump start financial markets. President-elect Barack Obama gives a major address at 11 a.m. Thursday on the economy and his plans.
He gave CNBC's John Harwood a sneak preview of some of those comments in an exclusive interview Wednesday.
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Just as the market has been eyeing him carefully, Obama told CNBC he is watching the markets and understands the need to restore confidence, a commodity in low supply in Wednesday's markets. He also said he plans a major overhaul of financial markets and regulation in the next couple of months and discussed plans for a more than $775 billion stimulus package.
"Right now, given the sensitivities of the market, I've got to pay some attention to market psychology because part of what we have right now is such a loss of trust in both the marketplace and in government that restoring that confidence, restoring that trust is going to be very important," he said. Obama said he won't be watching the "crawl" at the bottom of TV screens. "What I will be doing is making sure that I'm communicating with key market participants on a regular basis, again, to explain to them what exactly our plans are and to solicit from them good ideas," he said.
He also said he would work now on curbing the ballooning budget deficit instead of waiting for the crisis to end. On Wednesday, the Congressional Budget Office pegged this year's budget deficit at $1.2 trillion, nearly triple last year's record level.
As money rolled out of Treasurys and into commodities this week, some traders took it as a sign of hope that there would be more traction in the global economy this year. But Wednesday's trading in commodities markets, particularly oil, dashed that idea. "What I'm really disturbed about is what's going on in commodities," said Cashin. "It's like it was two months ago." Traders said some of those positive moves in commodities earlier this week came ahead of index rebalancing.
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Oil cratered on the Nymex Wednesday after inventory data showed larger than expected supplies, and other commodities also tumbled. Crude fell $5.95, or 12 percent lower at $42.63 a barrel in its biggest one-day drop since September, 2001.
M.F. Global's John Kilduff said the supply data was a concern but the bigger concern was the message in the ADP report. "If people don't have jobs, they don't buy $4 gasoline," he said. The build in inventories came even in the face of relatively cheap prices, a sign that demand is especially weak.
The Consumer Electronics Show is in full swing in Las Vegas Thursday and will put the spotlight on new products and electronics companies.
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