Market Insider: Friday Look Ahead
Markets will hang on every move out of Washington Friday, but trading could get quiet late in the day as investors leave for the long weekend.
The House is expected to vote on the $789 billion stimulus package, and the Senate is expected to follow with a vote Friday or Saturday. But traders are watching for any headlines on the Obama Administration's financial bailout plan, particularly the housing component. A Reuters story saying that a plan is near to help struggling homeowners pay their mortgages sent stocks flying, and reversed a more than 200 point decline in the Dow.
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Investors will also keep an eye on the latest problem with a White House nominee. Republican Sen. Judd Gregg withdrew from consideration as Commerce Secretary, saying he had a difference of opinion.
Bonds and many futures close early Friday, ahead of the three day President's Day weekend. Stocks trade on their normal schedule. Friday is light on data, with just a report on consumer sentiment at 9:55 a.m. The big earnings report of the morning is Pepsico , expected ahead of the opening bell.
"What's usually a lackluster day could have some morning excitement," said Patrick Boyle of LaBranche Financial. He said if there are more details that show a housing plan is close, the market could continue to rally. The Dow finished off just 6 points at 7932, while the S&P 500 rose 1.45 points to 835.19.
Traders will also be watching the action in Rome as finance ministers of the G-7 countries gather for their weekend meeting. The meeting marks Treasury Secretary Timothy Geithner's first meeting with the group, and the new Administration's first big international event.
Brown Brothers Harriman currency strategists said they expect the G-7 statement to express concern about currency volatility. "The yen could again be cited as it was in the (October) statement but the risk the pound is cited is low ... While we do not expect the G-7 to take steps toward adopting interventions as a policy tool, markets are likely to be more cautious about entering into long yen (or short sterling trades) ahead of the meeting," they said in a note.
The strategists also say they expect the dollar to continue to gain ground as markets worry about policies to battle the global downturn and credit crisis are not adequate. The dollar Thursday rose 0.30 percent against the euro and was up 0.50 percent against the yen .
Robert Hormats, Vice Chairman of Goldman Sachs International, said he does not expect much from the G-7 meeting but it will be a prelude to the April G-20 meeting in London where there may be more concrete results. He said the ministers will show they are working individually on their own policies to fight economic and financial markets issues but they will also make a show of cooperation.
Hormats said Geithner is not likely to say any more about the U.S. financial stability plan than he already revealed in a speech earlier this week. "They will show they are working together. They know what America is doing. They know the fiscal policy piece and they've heard the financial plan," said Hormats.
U.S. Treasurys gave up gains as the stock market bounded higher Thursday afternoon. The 10-year was yielding 2.79 late in the day, down from a high of 2.82 Wednesday. The 30-year was yielding 3.52 percent after a weaker than expected $14 billion auction.
The oil market is one to watch. Crude fell $1.96, or another 5.45 percent to $33.98 per barrel.
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