Google's strong earnings and rocketing stock price may temporarily distract investors, but tension around U.S. debt ceiling discussions and the results of European bank stress tests Friday could quickly snap markets back to bigger concerns.
Google stock soared more than 10 percent after it reported that net income jumped to $8.74 a share or 2.51 million, a 36 percent increase and well above the $7.68 per share expected. Google revenues were $6.92 billion, well above the anticipated $6.55 billion.
"It's Googlicious and a lot of people were looking for it not to be very good. A lot of shorts are out there in the name. They're covering. It's trading like water," said Steve Massocca of Wedbush Securities.
"I don't think it's going to make the market rally, but it's not going to hurt. It probably helps tech, and tech has been leading the market down. Earnings season is doing well so far. Alcoa was good. J.P. Morgan was good. Google was good," he said.
Citigroup is the big earnings report of the morning Friday, and it is expected to release results ahead of the opening bell. Genuine Parts and Mattel also report.
On the data front, markets are watching CPI and the Empire State survey at 8:30 a.m. and June industrial production at 9:15 a.m. Consumer sentiment is released at 9:55 a.m. Consumer prices are expected to have declined by 0.2 percent, with the decline in gasoline prices. The Empire survey is expected at 4.2, after a surprise decline in June.
Standard and Poor's, after the market close, joined Moody's in saying it could cut the AAA U.S. credit rating if no deal is struck on the debt ceiling.
Traders have been handicapping what would happen if no agreement to raise the ceiling is reached by the Aug. 2 deadline.
David Ader, chief Treasury strategist at CRT Capital, said Treasury securities would most likely immediately sell off hard, but the resulting mayhem in risk assets would likely send buyers back into Treasurys. Even in the event of a temporary default, investors would know the payments on Treasurys would be honored.
Stocks Thursday finished lower, giving up early gains after Fed Chairman Ben Bernanke clarified in Congressional testimony that the Fed is not preparing to take further easing actions, an assumption that some investors made from his comments the day before. The Dow was down 54 points at 12,437, and the S&P 500 was off 8 at 1308. Nasdaq , heavily impacted by tech, was off 1.2 percent at 2762. Tech shares were down nearly a percent and were the worst performer of the S&P industry sectors.
Bernanke's comments also sent oil futures lower. Nymex crude finished at $95.69, down 2.4 percent. The dollar edged higher against the euro and moved higher from record low levels against the Swiss franc after Bernanke's testimony. Bonds, meanwhile, saw yields rise after a successful 30-year auction.
The results of European bank stress tests are at 12 p.m. ET. Italy also faces a second vote on its austerity package in the lower house.
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