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Thursday Look Ahead: Retail Sales Should Be Bright Spot

April's chain stores sales should be a bright spot Thursday, against a backdrop of recent economic reports that show a weakening trend.

Emely | Cultura | Getty Images

Discounters and department stores are expected to lead the gains, according to Thomson Reuters, which sees an average 8.2 percent same stores sales increase for the retailers it tracks. This year's late Easter holiday is the main reason behind the big jump in April, and it should be the best month since March, 2010, when sales rose 9 percent.

Traders will focus on the comments from retailers to see what they say about consumer behavior, now that gasoline prices are well above $4 a gallon in many areas. Discounters' sales are seen up 10.8 percent in April, and department stores are expected to rise 9.4 percent. Teen apparel should also make strong gains of about 9 percent. Drug stores, estimated up 3.6 percent, should be the worst performers, followed by apparel, up 4.4 percent, according to Thomson Reuters.

"I'm expecting good news...The weather was a negative. The gas prices are a negative, and real estate is a negative. But the stock market is positive and there has been momentum, and I think there's some general constructive reaction to what the retailers have been doing with the merchandise and product," said Barbara Kahn, director of the Jay H. Baker Retailing Center at Wharton School.

Kahn said retailers are being more responsive to consumer tastes and are trying not to raise prices. "There's some strategic innovation to try to cut costs in other ways," she said.

What Else to Watch

Weekly jobless claims data is also expected Thursday, and economists expect claims to remain elevated, in the 400,000 area. Productivity and costs are reported at the same time as claims, at 8:30 a.m. ET.

General Motors rolls out earnings ahead of the bell Thursday, as does Fortune Brands, Sara Lee, El Paso, Estee Lauder, CVS Caremark, DirecTV and Cigna. AIG, Kraft Foods, Visa and Priceline.com report after the closing bell.

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Fed Chairman Ben Bernanke speaks at 9:30 a.m. ET at a Chicago Fed conference on bank structure and competition. Chicago Fed President Charles Evans makes opening remarks just ahead of him, at the same event. Minneapolis Fed President Narayana Kocherlakota speaks later in the day at 1:15 p.m. in Santa Barbara.

President Obama makes a historic first visit of his presidency to Ground Zero, where he will lay a wreath honoring the thousands who died there. This comes just days after Obama made an midnight announcement that U.S. special forces had tracked down and killed terror mastermind Osama bin Laden in his compound in a residential area of Pakistan.

Whither Markets

Stocks fell Wednesday, as equities markets around the world joined a sell off in commodities. The U.S. market was also hit by a disappointing report on private sector hiring from ADP, and a surprising dip in the ISM services report, which also showed a weaker jobs component. While typically not seen as an accurate reflection of the government jobs report, traders speculated the 179,000 jobs reported by ADP suggests the April employment report could now come in at the low end of expectations Friday. The consensus is for 198,000 new jobs in April.

The Dow lost 83 points, or 0.7 percent t0 12,723, and the S&P 500 lost 9 point to 1347. The Russell 2000 was down 1.3 percent at 832, and is now down 3.7 percent for the week.

As stocks fell, Treasurys rose and yields fell to 7-week lows. The 10-year yield fell, as a result, to 3.257 percent. That put it below the yield on the 10-year German bund for the first time since June, 2009. The 10-year bund yield was at 3.29 percent, rising as a new bailout plan was announced for Portugal and ahead of an expected euro zone rate hike.

"The bottom line is the data has been persistently weak, and today we got a couple of bad ones," said David Ader, chief Treasury strategist at CRT Capital.

"Obviously up to this point, it's been all about short-covering but at neutral, we are still getting weaker data ..we're pushing the edge of the envelope," he said, adding he's not yet expecting the 10-year at 3 percent. But the move in stocks bears watching as does the widening of some credit spreads, he said.

European Central bankers meet on rates Thursday and while no rate hike is expected, ECB President Jean-Claude Trichet is expected to signal whether the ECB will raise interest rates in June or July. The euro , as a result of speculation ahead of the meeting, traded higher, rising above 1.49 temporarily and finishing at 1.4832. The Bank of England also holds a rates meeting Thursday morning, ahead of the New York market open.

Even as the euro rose, risk assets sold off. The shakeout in silver continued with silver losing another 7.5 percent on the Comex to $39.3830. Major investors Carlos Slim and George Soros have been bailing out of the metal, and for the fourth time since last week, the Comex raised margins to curb speculative behavior.

Gold also fell Wednesday, in its biggest drop since March 15. It was down 1.6 percent at $1514.90 per ounce. Emerging stock markets continued to sell off. Brazil, for instance, fell 1 percent to a 10-month low.

Jordan Kotick, global head of technical strategy at Barclays, said he anticipates stocks to have a choppy summer and the sell off in risk could be a signal of that. He said the stock market topped out in May and bottomed in July in both 2009 and 2010. "(Quantitative easing) QE coming off the table also suggests we should get a choppy summer," he said.

The Fed has said it would end its program to purchase $600 billion in Treasury securities by the end of June. The program was seen as a boost to stocks as the Fed buying drove investors into riskier assets, while keeping interest rates low.

"We're still bullish, but we expect a choppy summer," said Kotick. He said a correction could be in the area of 7 to 11 percent.

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.

  • CNBC Senior Commodities Correspondent and Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.