Friday Look Ahead: Earnings Could Call the Tune for Stocks
Bank of America and General Electric are two heavy weights whose earnings should steer stocks into Friday's opening bell.
Both companies' stocks rose Thursday, in advance of the earnings reports. GE, the parent of CNBC, saw its stock run up about a half percent, and Bank of America was up more than 1 percent. GE is expected to earn $0.32 per share on revenues of $39.92 billion, and Bank of America is expected to earn $0.15 per share on revenues of $24.89 billion.
Google's strong earnings drove its stock higher in Thursday's after hours, and investors will also be weighing management changes at the top of the company. Google co-founder Larry Page will replace CEO Eric Schmidt, in a surprise move. In another tech land surprise, a board room sweep at Hewlett Packard resulted in five new directors, including former eBay CEO Meg Whitman, replacing four others, who were part of the board involved in the contentious replacement of former CEO Mark Hurd.
Tech continued to be a troubled spot during Thursday's trading. Amazon was down more than 2.6 percent, and Apple was down more than 1.8 percent.
The Dow fell just 2 Thursday to 11,822, after dipping as much 80 points during the trading day. The S&P 500was off 1 at 1280, but the Nasdaq, hit by a tech sell off, slumped 21 points to 2704. The Russell 2000 , lost another 1.1 percent to 778 and is down 3.65 percent in three days.
Improved U.S. data, including a more than 12 percent rise in existing home sales andfewer weekly jobless claims, prompted selling in Treasurys. The yield on the 10-year rose as a result to 3.46 percent.
"The S&P tested that 1268 level and that was a pretty good sign," said Patrick Boyle, FBR Capital Markets managing director. "If Bank of America doesn't put up a pretty good number, it will spook the rest of the big cap financials." The S&P financial sector was a half percent higher Thursday.
"You've got tech getting beaten up. I think there's a question in the market here about what people want to do. Are they looking at buying the dip?" he said, noting the declines in Nasdaq, the Russell and S and P.
"As much as you want to hate our tape, with the move lower in Treasurys, it's harder not to buy the dip in the overall market," Boyle said. While some traders and analysts see some of the profit taking in the last couple of days as a sign of a pull back, Boyle said he expects pent up demand for equities to keep the market from selling off in a big way.
Friday is also options expiration and traders, for the most part, do not expect much response in the stock market. Integral Derivatives partner Keith Goggin said the expiration so far has been pretty quiet and should not have a big impact on Friday's open. "People have been continuing to clean up their positions so there has been some decent trading. Certainly, a lot of people picked up outer month protection this morning when the market was dropping," said Goggin on Thursday afternoon.
Metals were also hard hit Thursday, and material stocks were the worst performing sector — down 1.5 percent — after Chinese fourth quarter growth came in at a surprisingly high 9.8 percent. That and an inflation reading close to 5 percent chilled stocks globally on concerns China will go too far in tightening policy.
Copper was down 2.2 percent to $4.2625 per pound, and goldlost 1.7 percent to $1346.50. Dollar/yenwas at 83.0082, after the dollar gained 1.2 percent Thursday, but it was fractionally lower against the euro.
"I think the bigger picture that's developing right now, is that 2011 is going to be the year where North America starts to outperform Asia," said Boris Schlossberg of GFT Forex.
"What you're seeing is the dollar performing better against the Asian Pacific currencies, where it will probably remain range bound against the euro, and I think the pound is it's own case," he said. The Australian dollar was down 1.3 percent against the U.S. dollar Thursday, on concerns that too much tightening by China would slow growth in the region.
For Friday, Schlossberg said he is watching U.K. retail sales and the German IFO business sentiment indicator. There is no U.S. data.
"Dollar bulls were really validated today. Data was much better across the board and that gave the dollar/yen a much needed boost," he said.
Earnings reports are also expected from Air Products , Airgas , BB&T , First Horizon National , Schlumberger and Sun Trust .- Follow me on Twitter @pattidomm.
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