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Friday Look Ahead: Refreshed Bull May Catch its Breath Before Moving Higher

Thursday, 24 Mar 2011 | 8:38 PM ET

The stock market's newly recharged bull could slow down its rapid run Friday, as investors look ahead to a weekend of unknowns.

Sandra Baker | Photographer's Choice | Getty Images

But traders see the market resuming its rise into the quarter end next week, while money managers make sure they have just the right exposure to the equities market.

Stocks rose Thursday against a backdrop of events that just a week ago might have turned the market south. The Portuguese government is crumbling and it is contending with a fiscal mess; European leaders failed to structure a detailed plan for their sovereign problems; fighting continues in Libya, and everydayJapan struggles with new after effects from its earthquake and nuclear crisis. The market even ignored a surprisingly negative number for U.S. durable goods orders.

The Dow has gained about 4.8 percent in the past week, as a month-long sell off ended. On Thursday, it was up 84 points, or 0.7 percent to 12,170. The S&P 500 was up 12 points to 1309 Thursday, a 0.9 percent gain. The S&P has recovered 4.1 percent since March 16, after falling a total 6.4 percent up until then, from its Feb. 18 multi-year high of 1343.

On Friday, traders will be watching Research in Motion continue the tailspin it started in after hours trading Thursday. RIM fell 10 percent after it released a disappointing outlook for the first quarter. It blamed , in part, greater spending for its PlayBook tablet device. Its fourth quarter earnings, however, were up 32 percent to $934 million or $1.78 per share.

Oracle , which reported better than expected earnings, saw its stock rise about 3.5 percent after Thursday's bell.

Investors will also be watching the final revision to the fourth quarter GDP, released at 8:30 a.m. and consumer sentiment, reported at 9:55 a.m. Traders are also keeping an eye on oil, which held above $105 Thursday and has gained 8 percent since the middle of last week.

"I think we hit a stall speed here," said Steve Massocca of Wedbush Securities. "I think we go sideways. Maybe we roll over a little bit here for awhile. We definitely got through the 50-day (moving average) today, and I would anticipate a day of rest barring jolting news. I think we'll probably consolidate our gains or actually trade down a little. That would be my guess." The S&P 50-day was at 1305.

Massocca said the week-long rally has not surprised him, as investors sifted through the cause and potential outcomes of Europe, the Middle East and Japan. "I think the chance to throw a dart at it (the market rally) is over," he said. He does expect the quarter end to pull some investors into stocks.

Traders have started talking about the upcoming earnings season and the warnings ahead of it, now that the first quarter reports are finished. Massocca said higher input costs, the impact of Japan and higher oil could all show up in financial statements. The market, however, may look past some of it as temporary, like the impact of Japan on the supply chain and sales.

"Do people look past it and the stock gets bid up? They certainly looked past it in Adobe," he said. Adobe specifically warned that its earnings would be impacted by Japan, yet the stock was higher Thursday.

Massocca said the upcoming earnings period should be more eventful than last. "I'm expecting it to be volatile, and I'm expecting it to be difficult to predict. That's going to create surprises and volatility and opportunities for traders," he said.

'Teflon' Euro

Even with a Fitch downgrade of Portugal, and the downgrade of Spanish banks, the euro bounced back agains the dollar Thursday. It was up a half percent against the dollar, at 1.4174. In thebond market, investors moved away from Treasurys and the yield on the 10-year rose to 3.4 percent. Late Thursday, S&P downgraded Portugal's long-term debt to BBB.

"There really wasn't much of a bearish motivation today outside of the price action in external markets," said Treasury strategist Ian Lyngen at CRT Capital. He said the bond market again will be watching be to see if the stock market; corporate issuance and the oil market.

Traders expect the euro to remain strong, suspended by the promise of a rate increase this spring. European Central Bank President said at a press briefing after the last ECB meeting that interest rates could rise as early as April.

Fed Chairman Ben Bernanke, perhaps taking his cue from the ECB, announced that the Fed will now start holding press briefings of its own four times a year immediately following rate meetings. Goldman Sachs economists, in a note, said they think the move has two implications for markets. One is that the FOMC forecasts of growth and inflation will be timelier and more useful because of it. They currently are released with he FOMC minutes, three weeks after the meeting.

The other implication is that it could create greater volatility, particularly at the first few press conferences. The first is scheduled for April 27 at 2:15 p.m.

"How big a risk this is will depend on details that have yet not yet been released, including how spontaneous the Q&A session is and who is asking the questions," they wrote.

"Pretty soon the news reporters will be giving monetary policy," quipped an analyst at another firm. The analyst also said now Fed watchers will be parsing Bernanke in "real time" in addition to picking over the Fed statement for every change in nuance.

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

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  • Patti Domm

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

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