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Earnings, Data Could Send Markets Closer to High Water Mark

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A new wave of earnings news Thursday could help push stocks toward the year's high water mark, but overseas events may play a role in setting the course for markets.

EU leaders begin a two-day meeting, as investors await more headlines on Spain, amid speculation it is edging closer to seeking a bailout. There was also Thursday morning news expected on China's economy, including GDP, retail sales and industrial production.

U.S. stocks Wednesday were higher , with the S&P 500 up 4 at 1460, on the way to its 2012 high closing high of 1465, set Sept. 14. The Dow did not perform as well because of a big decline in IBM that shaved 80 points off the average. The Dow finished up five points at 13, 557.

"It's pretty mixed price action, " said Barry Knapp, head of equity portfolio strategy at Barclays. Utilities were the best performing S&P sector, up 1.3 percent. "When you look across all the sectors, you have a decent bounce in financials, and energy's pretty strong. When you think about those three sectors they're all beneficiaries of Fed policies."

The market's rise has surprised some traders and analysts, who thought earnings and the election would keep stocks heading lower. "Everybody keeps saying it's the Fed shoveling money at things, " said Art Cashin, director of floor operations at UBS. "It's going beyond the (Fed Chairman Ben) Bernanke put now. It's the Bernanke Santa stocking."

Treasury yields rose Wednesday, with the 10-year rising to 1.81 percent, its 200-day moving average. Yields move opposite to bond prices, and the 10-year yield was last that high on Sept. 14.

"We are not selling off because some of the data has looked better. Some of it has to do with the election. The seasonals this time of year are bad, " said David Ader, chief Treasury strategist at CRT Capital. "I'm very tepid about how much weakness we'll get out of it. The seasonal patterns are negative up to the election."

President Barack Obama's performance improved in Tuesday's debate, after a weak showing in the first debate two weeks ago. That debate cost him in the polls against Republican challenger Mitt Romney, who was leading Wednesday in Gallup's tracking poll.

"The bond market saw an Obama win as more risk off and a Romney win as a more risk on. Now the field has changed somewhat, " said Ader. He said the bond market is going back and forth without a clear theme. Ader said if the data improves that would help Obama's chance, but it could also make the possibility of a "fiscal cliff" even greater. The fiscal cliff is the expiration of Bush-era tax cuts at the end of the year, combined with automatic spending cuts that will start Jan. 1 if the lame duck Congress does not act after the election.

Earnings news is expected before the opening bell Thursday from Travelers, Verizon, Blackstone, Morgan Stanley, Philip Morris, Diamond Offshore, Nokia, Southwest Air and Union Pacific to name a few. Google and Microsoft report after the bell, as does Capital One, Advanced Micro Devices and Chipotle .

Economic reports include the 8:30 a.m. ET weekly jobless claims, expected at 365, 000 after last week's surprise, once off dip to 339, 000. That decline was blamed on a technicality when one large state did not file some accumulated claims. The Philadelphia Fed survey data and leading indicators are reported at 10 a.m.

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 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.