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Market Insider: Thursday Look Ahead

Wednesday, 11 Mar 2009 | 9:11 PM ET

The Dow had its first two-day winning streak since early February, and traders are debating whether the stock market's move is constructive or the set up for a bear market fall.

Retail sales data and weekly jobless claims are reported ahead of the open Thursday. Besides the 8:30 a.m. data, there are also business inventories at 10 a.m.

Washington will catch a lot of the attention, as Treasury Secretary Tim Geithner testifies before the Senate Budget committee at 10 a.m. on President Obama's 2010 budget. But perhaps even more closely watched will be the hearing on mark-to-market accounting, conducted by the House Subcommittee on Capital Markets, also at 10 a.m.

While not necessarily a market mover, one of the big business stories of the day goes on in the federal court house in Manhattan, where ponzi scamster Bernie Madoff is expected to plead guilty to 11 counts of fraud.

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The Nasdaq was where the winners were Wednesday. Nasdaq scored a near 1 percent or 13 point gain, but the Dow eked out just a 0.06 percent or 3-point gain, finishing at 6930. The S&P rose 1.76 to 721.36. Financials were the best performers, adding 2.4 percent to Tuesday's gains. Tech were the second best, up 2.1 percent.

Stocks finished their first two day advance since Feb. 8 but still traders were skeptical of the carry through potential.

"Most of the volume is all program stuff. Nobody wants to take a stand anywhere," said one trader.

The dollar fell 1.36 percent against the euro while it fell 1.55 percent against the yen . After a so-so auction Wednesday, the 10-year rallied, adding 18/32 to 98-19/32, driving its yield to 2.914 percent.

"I think the market's been caught the wrong way," said Marc Chandler, chief currency strategist at Brown Brothers Harriman. "Yesterday, the day before we were testing the lower end of the euro's trading range ... people are short"

Chandler said the euro strength/dollar weakness is the result of several things, including comments from the Eurozone. Ahead of the G-20 meeting in April, he said the U.S. has been pushing Europe to do more in terms of stimulus. "Europe is saying we don't have to do more because things are going to get better. There's some signs of confidence creeping back in," he said.


Just Shut Up and Fix It!

J.P. Morgan CEO Jamie Dimon didn't exactly say shut up, but If you listened to Dimon speak to the Chamber of Commerce Wednesday, his message on curing the economy and credit crisis was simple. He called on Washington to stop its feuding. He also said the regulatory system should be simplified, securitization needs to be fixed and the entire mortgage industry should be regulated.

"I do believe that we are at a point where if our Congress, our Senate, our Democrats, our Republicans, our Treasury, our Fed and our president all work together, you will see us coming out by the end of the year. I think if we act like a dysfunctional family, and we don't finish these things and are forever debating them, I think this will go on for several years at this point," he said.

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Meanwhile, a Wall Street Journal survey of economists, released late Wednesday, gave Obama and Geithner failing grades at fixing the economy. President Obama received an average grade of 59 out of 100, and Geithner received even worse - a 51 average. Fed Chairman Ben Bernanke did the best, with a score of 71. This contrasts dramatically with Obama's appeal on Main Street, where he had a 60 percent approval rating in the last NBC News/Wall Street Journal poll.

Dimon also said he does not have a problem with mark-to-market accounting but it has been taken to an extreme and should not be applied to all assets. "I think it's wrong to mark-to-market our own private equity investments every quarter so good quarters --up, bad quarters -- down. We'd just like to tell our shareholders about our investments. If impaired, we should impair them. If worth more, we want to tell you," he said.

Dimon later spoke with CNBC's Dennis Kneale in a phone interview and told him J.P. Morgan made money in January and February. Sound familiar? A similar comment from Citigroup Chairman Vikram Pandit got the stock market roaring Tuesday. On Thursday, Bank of America's Ken Lewis will have his turn to comment. He speaks at Boston College's Chief Executives Club of Boston luncheon at 1 p.m. Surely, investors will be wanting to hear about the company's profitability as well as those Merrill Lynch bonuses.

Credit Crimp

As in the stock market, banks are top of mind in the credit markets.

"I do think the organic growth of financials is very strong so Vikram Pandit was right about that. I still think the credit markets, while they are much more tenuous than they were, are open for companies that are deserving, and this is different than last fall," said Morgan Stanley chief of credit market research Greg Peters.

Peters said one concern for the market has been news stories suggesting bond holders in financial institutions could take hits along side shareholders. "It's a major concern not only for the credit markets but for the overall financial system. You have basically private equity capital with no interest in investment in financials," he said, noting that common and preferred holders have been hurt. Now there is less interest in the bonds. "That historically is the way banks recapitalize ... It's absurd to think the government has to be very explicit that they have every intent of making sure that bond holders are protected," he said.

Peters said the credit markets have been casting a wary eye on the equities market though things have been better in the past two sessions.

"It's been weak, as we've been tracking stocks for the past couple of weeks," he said. "Credit was doing fantastic up until the Geithner speech. Then, just with stocks getting annihilated, we were going in the same way. Demand on corporate investment grade is still robust. I think there's a lot of decent forces at play, but we've been relegated to watching the equities markets."

Not so Rich

The Forbes billionaires list lost some once prominent members when it was released Wednesday evening. AIG's former chairman Hank Greenberg and former Citigroup chairman Sandy Weill both fell from the list as their stock prices crumbled. At the top of the list Bill Gates switched places with Warren Buffett, taking the top spot with $40 billion and Buffett, in second with $37 billion. In third place was Mexican investor Carlos Slim.

For the first time in six years, the number of billionaires dropped -- to 793 from 1,125 last year.

Questions? Comments? marketinsider@cnbc.com

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  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

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