Earnings reports from General Electric and Bank of America are the big numbers for markets Friday, and they matter nearly as much in the foreign exchange and Treasury markets as they do in the stock market.
Currency strategist David Gilmore said he's watching earnings news because of the impact on stocks, including after the bell results from Googleand IBM.
"That's what happens when the cost of money is next to zero," said Gilmore, market strategist at Foreign Exchange Analytics. Both tech heavy weights released better-than-expected profits after Thursday's bell.
Both GE and Bank of America report ahead of Friday's open. "That's the only game in town," Gilmore said. There's not much data Friday morning. Industrial production is released at 9:15 a.m., consumer sentiment is reported at 9:55 a.m. and the Treasury's TIC data on international capital flows is issued at 9 a.m.
Treasury traders too are focused on corporate earnings because they are driving the stock market higher, and that market is moving in tandem with risk assets, like commodities. It is also heading in the opposite direction of the wilting U.S. dollar. In fact, one Treasury desk's afternoon note Thursday looked like a run down from a stock desk, with a list assessing Thursday's major earnings reports.
The Dow finished above 10,000 for a second day, rising 47 to 10062 Thursday. The S&P 500 was up 4 at 1096, just shy of the psychological 1100 mark.
Oil continues to bubble higher, reaching a year high of $77.58 per barrel, a gain of 3.2 percent. Gold, meanwhile slipped 1.3 percent to $1,049 per troy ounce.
Treasurys were under pressure, after weekly jobless claims data came in at 514,000, the lowest level of workers to file new claims since January. William O'Donnell of RBS said bonds appeared to be affected by some selling by foreign central banks. The dollar slipped to $1.4937 per euro, and the yield on the 10-year crept up to 3.472 percent.
The floundering dollar continues to feed inflation fears. Those worries cropped up in the widening gap between the yields on 2-year and 10-year notes, which reached 2.51 percent, the widest level in a month.
Obama Administration officials spoke in support of the dollar, in interviews with CNBC. Larry Summers, National Economic Council Director, repeated the U.S. official line that the strong dollar is in the national interest.
Treasury Secretary Timothy Geithner, in an interview with Maria Bartiromo, went a bit further when she asked him about criticism about the U.S. dollar's reserve status.
"I say this all the time.. that the dollar's role in the system confers special obligations and responsibilities on us as a country, and it is very important that Americans understand that we need to do everything possible to sustain confidence in our ability to keep inflation low and stable over time and to make sure we're getting our fiscal house in order. That's a really important thing to confidence generally. We take that very seriously, nobody more than me" he said.
When asked what he was doing to keep the dollar strong, Geithner answered by saying he doesn't comment on foreign exchange markets, but he pointed to the fact that investors fled to the dollar and dollar assets during the height of the financial crisis.
"You saw the dollar rise when people were most concerned about he future of the world," he said. "And that is a very important thing. It's not something we can count on. It's something we can make sure we understand and we continue to foster, and again, we are going to to do that."
Yet, many in the markets believe the U.S. government is not now concerned about the dollar's fall and that it instead sees an advantage from the weak dollar's positive impact on exports. Another idea circulating among some traders is the view that the Fed could help the dollar even before it raises rates by continuing to unwind some of its programs.
Kevin Ferry of Cronus Futures Management said the Fed is showing signs that it could pull back on some liquidity in the marketplace through repo agreements with primary dealers and others. Traders have said this type of activity could result in a rise in rates even without the Fed raising its target fed funds rate.
Ferry added that if that's the case, there could be a positive impact on the dollar, which has been falling to new lows daily.
So far this earnings season, the early going shows most S&P 500 companies beating estimates. As of Thursday morning, 80 percent of the 33 companies reporting had better than expected earnings.
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GE could be the biggest factor for stocks Friday morning, said Todd Leone of the Cowen equities desk.
"GE is big because as GE goes, the economy goes. We also have (options) expirations tomorrow, which we saw a little of today," said Leone.
General Electric, often seen as a barometer for the broader economy, is expected to earn $0.20 per share on revenues of $39.36 billion. GE holds a conference call ahead of the open, and investors are looking to see what GE will say about its finance arm. There is also interest in whether GE has anything to say about its discussions with Comcast about a deal for a majority stake in NBC Universal, parent of CNBC.
Bank of America is expected to report a loss of $0.03 per share, on revenues of $27.70 billion.
Bank of America Thursday said CEO Ken Lewis will give up his $1.5 million salary and other compensation for 2009. Lewis is also expected to repay the more than $1 million he was paid so far this year. Pay Czar Ken Feinberg is the one who suggested Lewis, under fire for his handling of the Merrill Lynch acquisition, give up his pay.
Stocks could get some help Friday from Google, which saw its shares rise after it reported profits of $1.64 billion or $5.13 per share. IBM stock though fell after it reported lighter than expected revenues of $23.6 billion. IBM's third quarter profit of $2.40 per share was better than the $2.38 per share expected. The company also raised its full year forecast.
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