Market Insider: Friday Look Ahead
Options expirations and a few economic headlines are the big factors for stocks Friday.
But also, like an economic weather vane, the financial stocks will point out the market's direction.
The S&P financial sector was up nearly 4 percent Thursday, but it is down 9.8 percent in what has been a volatile week of trading. Big secondary offerings from institutions looking to raise capital have weighed on the group in recent sessions.
From 'Fast Money':
The Dow Thursday was up about a half percent at 8329, while the S&P was nearly a percent higher at 892. The Nasdaq, benefiting from buying in tech shares, gained 1.5 percent to 1689.
Traders, for the most part, saw Wednesday's sell off and the market's weakness this week as signs the market was in a short term pull back from its roughly 30 percent runup. But the move higher Thursday encouraged some who think the pull back won't be that severe.
"We held that 880 level on the S&P (500) which was a big level," said Todd Leone of Cowen. "The market today is acting well."
Some traders don't believe the selling is finished. They see the market as overbought and needing to correct more. One trader, who had expected Thursday's market to be weak, said investors are still buying the dip. He said "plain vanilla" or mutual fund buyers came in during the afternoon to buy big tech names, like Cisco and Microsoft. Tech was the first group where investors took profits as the market started to sell off.
For Friday, there is a batch of data ahead of the market open, including the consumer price index and the Empire State Survey, both at 8:30 a.m. There is also industrial production and capacity utilization at 9:15 a.m., and consumer sentiment at 9:55 a.m. The Treasury also issues data on international capital flows.
Leone said the expiration of equities and ETF options Friday could result in some volatility. "We'll see. It's up to the financials holding on, and they're acting ok today."
J.C. Penney earnings are also expected ahead of the opening. A positive outlook and earnings beat from Nordstrom late Thursday could be a positive for the retail group.
Also Friday, General Motors will inform its dealer network about which locations it will no longer support. Chrysler made a similar move Thursday, eliminating nearly 800 dealerships.
Treasurys were barely changed Thursday in a day of quiet trade after the rally earlier in the week. The 10-year yield was at 3.107 percent. Larger than expected jobless claims encouraged buyers, but the stock market's move higher weighed on prices.
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"Stocks performed fairly well today. However, they were off of bad numbers, and the bond market is taking it that we're not out of the woods yet," said Michael Franzese, who heads the government trading desk at Standard Chartered.
"(On Wednesday), there were macro buyers in the market, selling European and U.S. stocks and buying Treasurys, and today you have a positive stock market and bonds are basically closing unchanged on the day which is really good," he said.
Franzese said he expects Treasurys to stay quiet though the next week and into the Memorial Day weekend. After that, the Treasury will once more be holding big auctions.
The dollar lost out to the euro but gained against the yen Thursday. The dollar was at $1.3637 per euro, and the yen was 95.748.
"Investors continue to believe the recovery story for the second half of 2009. That is good for all the risk currencies and that's why the dollar suffers. So far, the benefit of the doubt is going to the bulls until the market sees the data to deny that thesis," said Boris Schlossberg, director of currency research at GFT Forex.
Schlossberg said the euro could weaken a bit Friday on first quarter GDP data for the Eurozone, if it's worse than expected. Otherwise, though, the euro trend is higher. "Until proven otherwise, the trade is to the upside of the euro, the pound and the Australian dollar . The currency market has been really dominated by risk flows at this point ... All under the grand recovery theme," he said.
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