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Market Insider

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Feb.26

8:47 PM ET

Thursday, 26 Feb 2009

Market Insider: Friday Look Ahead

Posted By:Patti Domm

Topics:Banking | Congress | Currencies | Stock Market | Investment Strategy

Sectors:Banks | Oil and Gas

Companies:Dell Inc | Gap Inc | Cisco Systems Inc | Citigroup Inc

Stocks enter the last trading day of the month with a near 10 percent decline and the promise that this will be the second worst February ever.

"This market will punish anybody blinking the wrong way," said Tim Smalls, head of equities at Execution LLC. "This is the kind of market that kills everybody. It's not a trading market. You can't make money on either side. It's low volatility and low volume."

The Dow Thursday traded in a near 230 point range, before closing down 88 points, or 1.2 percent at 7182. The S&P 500 slumped 12, or 1.5 percent to 752. The Dow is down 10 percent for the month and the S&P is down nearly 9 percent. The Nasdaq is off 5.8 percent for the month. The worst February for stocks was in 1933.

More From CNBC.com

The weakest S&P sector Thursday was health care, which fell 5 percent on concerns President Obama's health care plan will dig into industry profits. The plan was unveiled along with the $3.6 trillion Obama budget blueprint. The President proposes to expand the health care system to millions more people by creating a $634 billion reserve fund over the next decade.

Key data Friday includes the second look at fourth quarter GDP. Economists expect the number to be revised to -5.4 percent from the advance reading of -3.8 percent. GDP is reported at 8:30 a.m. February's Chicago purchasing manager data is released at 9:45 a.m., and consumer sentiment is released at 9:55 a.m.

There are also a few Fed speakers about at the U.S. Monetary Policy Forum in New York. Speakers include San Francisco Fed President Janet Yellen; Boston Fed President Eric Rosengren; St. Louis Fed President James Bullard, and Philadelphia Fed President Charles Plosser. Christina Romer, who chairs the Council of Economic Advisors, is also there. At 12:30 p.m., Vice President Biden holds a middle class task force meeting in Philadelphia.

Smalls says its possible the S&P could breach its November low in the next couple of days. "741.02 was the November low. Earlier this week, we hit 742.37. so we tested it, and unless we put in a strong rally in the next three or four trading days then we'll violate it," he said.

"The market just drips and drips and drips. We're stuck in this range until something happens. We need clarity," Smalls said. The market is looking for clarity in the form of a more detailed plan for banks from the Treasury Department, and has been in a funk since Treasury Secretary Tim Geithner failed to provide a detailed plan earlier this month.

The market is also watching for news on Citigroup [C Loading... () ], expected to strike a new deal with the government that would boost its capital and give the government a stake of as much as 40 percent. The announcement had been anticipated to come Thursday.

Scott Redler of T3Live.com also said the S&P is at risk of breaking through its lows. "At this point, the market tried to put together an oversold bounce, based on the short-term double bottom that the S&Ps put in place on Tuesday. It held a handle above 741. It couldn't break it on Tuesday, and we rallied," he said. But the market could take another shot at that level. "If it breaks that, the next compelling area to look for a reversal would be 705, and then 681."

Oil [US@CL.1 Loading... () ] continued its climb Thursday on supply concerns, gaining $2.72 per barrel, or 6.4 percent to $45.22. In the past three sessions, it recovered 17.6 percent.

At the same time, gold continues to lose some of its shine. Gold fell $23.90 per troy ounce, or 2.5 percent to $941.80. Redler, trades on a short horizon, said he sold the metal at $990 and started buying it back at $935. "The next level to consider to see if the bounce could continue is $955," he said.

Stocks to Watch

Dell [DELL Loading... () ] moved higher in the after hours session, even as it missed analysts' earnings expectations. Dell said though it raised its cost reduction target to $4 billion from $3 billion. Cisco [CSCO Loading... () ] also moved higher in the after hours. Gap [GPS Loading... () ] though tumbled after it reported profits fell 12 percent to $234 million.