Markets head into Friday watching and waiting to see if economic news outweighs geopolitical concerns, after Thursday's "risk off" selling spree.
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Stocks and commodities tanked Thursday on fears of a global slowdown, after China reported a surprise $7.3 billion trade deficit and Spain's debt was downgraded by Moody's. Oil was also a factor, falling hard early in the day, but regaining some lost ground after reports of a clash between police and protesters in the eastern region of Saudi Arabia.
The Dow fell 1.9 percent to 11,984, its worst day since August 11. The Nasdaq was off 1.8 percent at 2701, and the S&P 500 skidded 1.9 percent to 1295, below the important 1300 level.
Oil finished lower, down 1.6 percent at $102.70, after sinking below $101 earlier in the day. Reports that police fired on protesters in the eastern Saudi city of Qatif sent crude above $103 temporarily."I think the market was calculating in a quiet end of the week and that nothing would come of the 'day of rage' in Saudi Arabia. We were on notice for it but given what the Saudis have been doing so far and seemingly getting the clerical community on board, it didn't seem like it would be a factor," said John Kilduff of Again Capital.
U.S. officials told NBC News that Saudis intentionally used only "less than lethal" force to disperse the protesters in Qatif, home to a Shiite minority. Activists have been reported to have called for mass protests against the Kingdom's absolute monarch Friday, but it is not expected that those protests will be major. Protests are planned in other areas of the Gulf, including Yemen and Bahrain after Friday prayers, but the markets will be watching to see what happens in Saudi Arabia, the world's largest oil producer and viewed as much more stable.
"The stakes just went up in a big way. Even if this was a minor incident, it was a jarring reminder of what could happen there," said Kilduff, a CNBC contributor.
Oil has been a wild card for markets, and its rise above $100 has pressured stocks for fear it could snuff the economic recovery. Many traders believe if the unrest is contained, and Saudi is not a factor, the rise in oil could be temporary. Traders have also been expecting to see the S&P break down under the 1300 level, and now the debate is whether there is a new lower marker it is shooting for.
"The headlines have been fairly dire and we've bought the dips. I don't think we break from that dramatically without some sort of major catalyst," said one stock trader. "I didn't see anything today that was the last straw."
There is a stream of economic data Friday, starting with overnight inflation data from China. In the U.S., retail sales are reported at 8:30 a.m. and consumer sentiment is at 9:55 a.m. Both numbers could show the impact of higher gasoline prices on consumer spending and attitudes. Retail sales are expected to be up 1.2 percent, and 0.7 percent, excluding autos. Business inventories are released at 10 a.m.
European leaders also meet in Brussels for an extraordinary summit ahead of their late March meetings where they are expected to agree on how to deal with future bailouts. The leaders Friday are expected to work out a framework for a "competitiveness pact," which would include new mechanisms of fiscal discipline.
"No final decisions will be made until the March 24-25 summit," said Marc Chandler, chief currency strategist at Brown Brothers Harriman. "They'll say they're making progress toward an agreement ahead of the summit." Chandler said any news from the summit will not be until late in the New York afternoon, and is not likely to be much of a factor for the euro.
The dollar was a winner in Thursday's market sell off, gaining 0.8 percent against the euro in a flight-to-safety trade. The euro was at 1.3789.
Chandler said he is watching China's data and also the potential for a rate hike, following rate moves by Korea and Thailand. "The rise in market rates, like the 7-day repo rate in China, suggests it could be close to raising rates. It's been rising for two days now and some other swap rates have risen," he said. He added that rumors of this sort typically come up ahead of weekends, but it is unlikely China would raise rates while the National Party Congress is underway, and it may wait until next weekend.
What Else to Watch
Apple's iPad 2 goes on sale Friday with the usual fanfare attached to all things "i.".
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