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Jobless Claims Could Stir Up Fed Easing Talk

As traders try to game the Federal Reserve, Thursday’s weekly jobless claims will be a key piece of data ahead of next week’s FOMC meeting.

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“Europe will drive the bus, but if we get a nasty surprise in initial claims that could have a big effect. Then you’ll really hear everybody saying … this is bad enough. The Fedwill have to act,” said Art Cashin, director of floor operations at UBS.

Claims data will be released at 8:30 a.m. ET and are expected to show 380,000 claims, down from 386,000 last week. There is also a durable goods report at 8:30 am and one for pending home sales at 10 a.m. The Treasury auctions $29 billion 7-year notes at 1 p.m.

Exxon Mobil is one of the big companies to report early in the day, and Facebookrolls out its first earnings report as a public company after the bell. Amazon.com and Starbucks also report after the close.

“I don’t even think it’s earnings are as important as what it’s talking about going forward. How are they going to drive growth?” said one trader of Facebook .

Facebook fell in the after-hours session Wednesday, after Zynga plunged to an all-time low on a lowered outlook and surprisingly weak earnings of just 1 cent per share.

Wall Street analysts had expected earnings of 5 cents. Zynga also reported smaller-than-expected revenue and lowered its outlook for 2012, saying its bookings could be in the range of $1.15 billion to $1.225 billion, well below the $1.5 billion expected.

Stocks finished mixed Wednesday, as Apple’s decline on Tuesday’s disappointing earnings report weighed on the Nasdaq. The Dow was higher, up 58 points at 12,676, and the S&P 500 fell a half a point to 1337. Nasdaq ended 8 points lower at 2854. After the bell winners included Whole Foods and Visa — both reporting earnings beats.

U.S. markets were less influenced by Europe on Wednesday than they have been in recent sessions. Comments from a European Central Bank official took the pressure off the euro and helped steady European stocks. ECB policy maker Ewald Nowotny suggested the European Stability Mechanism, the euro zone’s permanent bailout fund, could be given a banking license. That would help alleviate concerns about Spain’s sovereign which is on the hook for a full-scale bailout of its banks.

Cashin said the comments carried a bit more weight than they might have otherwise.

“The deal was not that it really caught fire, but nobody denied it, so that gave it a little bit of extended life,” he said.

Traders have been speculating the Fed could ease next week, after its meeting Wednesday, but many Fed watchers think the Fed will take more time to make a decision. However, some of that talk about a new round of easingcirculated Wednesday in commodities markets, helping gold and oil gain.

“I don’t see how they let the softness of the economy pass without doing something. That’s what they do, they act,” said Stephen Stanley, chief economist at Pierpont Securities. He said, however, he does not expect the Fed to announce more quantitative easing, or QE3, next week, and it’s a very close call as to whether it does QE later, since it could look political ahead of the election.

The Fed has had two other full-scale QE programs, under which it bought Treasury securities. If it announces another round, it could buy mortgage securities, and it could be announced in September, according to some Fed watchers.

“I think given the very low payoff, it strikes me that it would be foolhardy to risk the institutional standing of the Fed over something like that,” Stanley said. He said the Fed may say next week that it sees low rates extended into 2015, from the current late 2014.

“I don’t think it’s that the Fed can’t do anything. It’s that the problems the economy faces have nothing to do with a shortage of liquidity. The problems aren’t the problems the Fed can address with monetary policy,” he said. “I think the problem is more that the policy backdrop on the federal government side, more than on the monetary side, is one that’s not conducive for growth right now.”

Other companies reporting earnings Thursday include 3M, United Technologies, CME Group, Colgate-Palmolive, Royal Caribbean, Moody’s, Starwood, Kimberly-Clark, Hershey, Telefonica, Raytheon, Potash, Credit Suisse, Banco Santander, Imax, Gilead Sciences, Occidental Petroleum, Conistar and Dow Chemical.

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- Written by CNBC.com's Patti Domm

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's Senior 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.