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Thursday: Watch Data, Bernanke and Health Care

Weekly jobless claims and durable goods could get more attention than usual Thursday, after a patch of not so good economic news.

Sandra Baker | Photographer's Choice | Getty Images

The latest economic reports to disappoint came back-to-back this week. First on Tuesday, consumer confidence skidded to a 10-month low. Then on Wednesday, new home sales fell a surprising 11.2 percent in January, to a 47-year low.

"If we keep getting data that misses the mark, like the last two days, it begins to be important," said George Goncalves, Nomura's head of interest rates in the Americas. Durable goods orders for January are expected to show an increase of 1.4 percent, and weekly jobless claims are expected at 460,000 when they are reported at 8:30 a.m..

Stocks on Wednesday shrugged off the housing news and rebounded as Fed Chairman Ben Bernanke, in Congressional testimony, assured investors that the era of easy money is here to stay for now. Bernanke testifies for a second day Thursday before the Senate Banking Committee.

"At this point, I don't think there's going to be any fireworks. Somebody could really press him, but he's playing it close to the vest. He's staying close to his dovish tilt," said Goncalves.

He noted Bernanke had previously laid out an exit strategy but did not bring much clarity to his plan Wednesday. Goncalves said that once the Fed starts carrying out reverse repos and takes other steps to exit its emergency programs, the market will start to react to the idea of higher rates.

"Once they do it that will make the price of money that much more dear, but it's not right now so the market will move beyond Bernanke's testimony very quickly. There's no new info we could glean from it and until they do actions, like putting in reverse, repos, the market will trade soft," he said.

Goncalves said the bond market will keep watching the comments from Fed officials carefully. "Last year was easier to get consensus (on the Fed)," he said. "This year it's harder to get consensus among Fed presidents. There isn't a cohesiveness of thought either. It's a new Fed in that there's enough friction that there's going to be some uncertainty priced in and people are going to pay attention to what they say."

Bonds prices rose Wednesday, but came off their highs after the government's auction of $42 billion in 5-year notes proved to be somewhat disappointing. Indirect bidders, a group that includes foreign central banks, bought only 40.3 percent, compared to an average of 49.8 percent at recent auctions. On Thursday, the government auctions $32 billion in 7-year notes at 1 p.m.

The Dow Wednesday was up 91 at 10,375, while the S&P was up 10 at 1105. Tim Smalls of Execution LLC said it feels like the stock market is coming to an inflection point.

"You've had a 1.5 percent move (higher) this month and on 50 percent of the trading days you had triple digit moves in the Dow," he said. At the same time, the volume in the Russell 3000 stocks declined 5 percent in February from January's levels.

"What that tells me is there's less people doing things, which means there's more volatility, less liquidity. It's telling me we're going to come to an inflection point in the very near future... which could go higher or lower," he said.

What Else to Watch

President Obama holds a bipartisan health care summit, starting at 10 a.m. in an effort to push Congress to adopt health care reform legislation.

Dan Clifton, head of policy research at Strategas, said Obama will rely on the Republican presence to strengthen his position on the topic. "He's basically trying to set up a contrast with the Republicans. What's our plan, what's your plan," said Clifton.

"The president is trying to set up and trying to come to sort of end game...and he knows the Republicans aren't genuine about resolving something on health care," he said.

"Thursday's message is 'we're trying to work it out.' Friday is: 'we tried. It didn't work and we've got to go it alone," he said. Clifton said it's likely Democrats will then push to have the bill the Senate previously approved, adopted by the House, and use a procedure that would require a 51 vote majority into the Senate. "Tomorrow is about laying the ground work to justify reconciliation, which lets them go with 51. Here's the problem, with that.. they may not have the votes in the House," he said. Democrats lost their 60 seat majority in the Senate when Massachusetts elected Republican Scott Brown to replace the late Ted Kennedy.

Clifton said if it looks like health care reform will fail for good, then stocks that should benefit are managed care, device makers and home health care companies. Those that would benefit if it is approved are hospitals and Medicaid HMOs.

Questions? Comments? Email us at marketinsider@cnbc.com

  • Patti Domm

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

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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