Market Insider

CONTRIBUTORS

Herb Greenberg
Senior Stocks Commentator
Bob Pisani
On-Air Stocks Editor
Sharon Epperson
Senior Commodities Correspondent and Personal Finance Correspondent
Rick Santelli
On-Air Editor
Lori Spechler
Senior Editor at CNBC, commodity trader in a former life.
Karina Frayter
CNBC Markets Producer

RSS FEED

» Help

Subscribe to this RSS feed
Stay up to date with the Market Insider blog.

Thursday Look Ahead: Earnings, Jobless Claims and More Bernanke

Published: Wednesday, 21 Jul 2010 | 9:38 PM ET

Text Size

By: Patti Domm
CNBC Executive Editor

Fresh economic data Thursday could feed the market's phobia about a weaker economy, ahead of another round of testimony from Fed Chairman Ben Bernanke.

There are also dozens of companies reporting earnings ahead of the opening bell, including AT&T [T Loading... ()], Bristol-Myers Squibb, Caterpillar [CAT Loading... ()], 3M [MMM Loading... ()], Travelers, UPS, GlaxoSmithKline, and Eli Lilly.

Microsoft [MSFT Loading... ()], American Express [AXP Loading... ()] and Amazon.com report after the closing bell, in what should be one of the busiest reporting days of the quarter.
NYSE traders
AP

Weekly jobless claims are released at 8:30 a.m., and existing home sales are expected at 10 a.m., as are leading indicators. The FHFA home price indices for May is also released at 10 a.m. Bernanke gives his semiannual report on the economy before the House Committee on Financial Services, starting at 9:30 a.m.

Bernanke's first day of testimony Wednesday, before the Senate Banking Committee, rattled stocks and drove investors into the relative safety of bonds. The dollar gained nearly a percent against the euro, as investors fled risk assets.

The Dow tumbled 109 points, or 1 percent to 10,120, and the S&P fell 13, to 1069. The 10-year yield slumped to 2.893 percent, a 15-month low, and the two-year was yielding 0.568 percent, an all time low.

"I think it was simply the fact he emphasized more the exit strategy and future accommodation and that's what scared people. For them to go back and do anything (more accommodative) is going to be pretty dramatic," said Russell Koesterich, market strategist at BlackRock.

Bernanke reiterated the Fed's economic view, released last week in the minutes from the last Fed meeting. However, his comments that the outlook for the U.S. economy remained "unusually uncertain" also spooked traders.

"I think in this situation, the markets, to some extent, set themselves up for a disappointment. There was plenty of speculation about this idea the Fed would change policy. In fact, it's not the forum in which the FOMC would do something as dramatic as stop paying interest rates on reserves, or announce another leg of quantitative easing. I think when those headlines didn't hit, we got a down trade in stocks. Some risk assets came off and we had a flight to quality trade in the Treasury market," said Ian Lyngen, senior Treasury strategist at CRT Capital Group.

Bernanke laid out three possibilities for additional stimulus, when asked. He said the Fed could indicate in its statement that it would be on hold even longer; it could lower the rate on reserves to zero, or it could buy more assets, such as mortgage securities.

"The Fed told us what he was going to say last week. What today did contain though was an opportunity for the Senate Banking Committee to question his preparedness if the economy were to deteriorate further, and I think being called upon to articulate that led the headlines to be a bit more dovish than they otherwise would have been. The prepared speech, as always, was a little ham on rye," he said.

Koesterich said he doesn't expect Bernanke to have much more impact Thursday. "It's out there. I really don't think he's going to take any of it back. I think the market was looking for a hug it didn't get," he said.

He expects the market's rocky trading to continue for now because of economic uncertainty, which could show up in corporate earnings in the third and fourth quarter. "I think the market is probably stuck in a range. I don't think you have that much downside because you do have a low inflation, low interest rate environment," he said, adding he does not expect a double dip.