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Trends in Jobless Claims, Earnings to Set Market Tone

After two disappointing reports, traders are watching Thursday’s weekly jobless claims to see if higher numbers are a trend or just a temporary phenomenon.

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Good U.S. corporate earnings reports could also be a balance for any negative headlines out of Europe. There are dozens of reports expected Thursday, including oil giant ExxonMobil and consumer-products giant Pepsico .

For jobless claims, the consensus estimate is for 376,000, down from last week’s 386,000. The number is released at 8:30 ET.

“We’ve had two high ones now, and my guess is it will come down a little bit, but not all at once,” said Stephen Stanley, chief economist at Pierpont Securities.

There is also pending home sales at 10 a.m. and the auction of $29 billion of 7-year notes at 1 p.m.

Other companies reporting earnings include drug companies Bristol-Myers Squibb and AstraZeneca, oil major Royal Dutch Shell, Unilever, Colgate-Palmolive, Dow Chemical, Goodrich, Kellogg, Potash, Pulte Group, Aetna, UPS, Altria, Raytheon, Whirlpool and Starwood Hotels, to name a few. Amazon.com, Starbucks, Coinstar and Zynga report after the closing bell.

Symbol
Price
 
Change
%Change
AET
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BMY
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QRE
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OUTR
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DOW
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HOT
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K
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MO
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PEP
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POT
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RDSA
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RTN
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SBUX
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ULVR
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UPS
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WHR
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XOM
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ZYGNA
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Stocks moved higher Wednesday, boosted by the momentum from Apple’s strong profit growth and other earnings news. But they also were supported by a Fedthat seems to be closing the door on further easing, yet keeping it open wide enough to provide a slight updraft for risk assets. The Dow rose 89 to 13,090, while the S&P 500 was up 1.4 percent at 1,390 and the Nasdaq, propelled by Apple’s 9 percent gain, rose 2.3 percent to 3,029.

The Fed ended its meeting Wednesday with very little change in its statement but it did up its economic outlook slightly and lowered its expectations for unemployment. Barclays economists wrote: “This does not sound like a Fed set to ease.” They pointed to the Fed’s change in language on growth, which now includes that the moderate growth will “pick up gradually,” and the fact that Fed Chairman Ben Bernanke said the Fed’s policy appeared to be in the right place.

Nomura economists issued a report that said they now believe a third round of quantitative easing is off the table.

But the equities market continues to hear the potential for more easing. “I think it was largely more of the same. I think he has been very persistent in this stance that they will ease if necessary, and that was very clear in his comment,” said Gina Martin Adams, institutional equities strategist at Wells Fargo Securities.

“That leaves the market wanting for more,” she said. “…The market already is experiencing a lot of volatility and I think the end of “operation twist” was part of it,” she said. The Fed’s “operation twist” asset purchase program is scheduled to end in June.

Adams said earnings this quarter are better than expected, but companies are not issuing enough forward guidance. “I think back in March, we started talking about the lack of confirmation to the upside for the S&P, and we’ve still got some downside risk. My sense is monetary policy has been the biggest driver of prices in the stock market in the last several years. When we’re looking in the near term and we see the end of twist coming, the market’s going to face a lot of uncertainty,” she said.

In response to a question on “twist” during his press briefing, Bernanke said: “…our expectation is that at whatever point that the purchases end, that financial markets being quite forward looking will have anticipated that and the effects ought to be moderate.”

Treasury yields rose after the economic forecast but retreated during Bernanke’s talk. The 10-year was on both sides of 2 percent, ending the day just beneath that level. Nomura Treasury strategist George Goncalves said Bernanke ended the advance in yields during the press briefing, as he answered questions with a more “dovish tilt.”

Goncalves said it did appear that Bernanke took away the idea that Twist would be extended, and already the market is trading that view with an outperformance in 3-year Treasurys a sign of an unwind of the program.

Interestingly, there was a change in the individual forecasts of Fed officials on interest rate expectations. In January, two Fed officials did expect the Fed to move away from zero interest rates until 2016, but those forecasts were no longer there in Wednesday’s release. Two additional forecasts were added to the biggest group who expect the Fed to return to a more normal rate environment in 2014.

Bernanke explained, in response to a question, that those individual projections are inputs to the committee decision, and it’s the committee decision that matters.

“I could find bearish things to say. I could find bullish things to say. He didn’t take QE3 off the table, or additional measures. They basically deferred these important decisions until June. This is not an immobile body. We’ve seen plenty of times when the market gets a heads up in speeches,” said John Briggs, Treasury strategist at RBS.

Follow Patti Domm on Twitter: @pattidomm

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.