Tuesday's markets were plagued by a pervasive and choppy crankiness, but there are a few things that could help stocks shake that mood Wednesday.
First, if there's a capital-raising deal for bond insurer Ambac , that could be a major positive. Also, if ADP's employment report is better than expected, it would at least temporarily lift some of the anxiety surrounding Friday's jobs data.
Investors have plenty of economic news to consider Wednesday. ADP releases that report on February jobs at 8:15 a.m. The report is by no means a perfect barometer, but traders pay it close attention as a guide to the government's Friday jobs data. The expectation is for negative 10,000.
Productivity and costs data is due at 8:30 a.m. ISM non-manufacturing, an important number last month, is released at 10 a.m. and factory orders are also reported at 10 a.m. The Fed's beige book of economic activity is released at 2 p.m. Two important retailers, Costco and B.J. Wholesale are reporting earnings Wednesday morning.
Investors will also be looking over the results of Tuesday's primary elections in Ohio, Vermont, Rhode Island and Texas. Sen. Hillary Clinton, D-NY and Sen. Barak Obama, D-Ill. were in a horse race to pick up delegates in Texas and Ohio. "I think tonight is going to prolong things," said Greg Valliere, senior vice president and chief strategist for policy research at Stanford Financial Group "It's going to insure that they will keep beating up on each other until April 22" when Pennsylvania holds its primary.
"If they just keep dumping on each other for another six weeks that has to help the Republicans," he said. Valliere says that scenario would be a slight positive for the market, but the thing the market is most focused on right now is Friday's jobs report.
The stock market was volatile Tuesday but the real action was in the credit markets. The two-year finished with a yield of 1.603 percent, but it had dipped to a level of about 1.50 percent around midday. In a huge flight to quality, spreads widened dramatically between Treasurys and other instruments.
"The credit crunch, a lot of the time, is just beneath the surface. When the markets start to recognize it, for whatever reason, whether it's hedge fund rumors, counterparty risk concerns, or tattered balance sheets, it seems like big investors just go overboard," said CNBC's Rick Santelli. "All the metrics, whether you're looking at swaps, the ABX (mortgage index), CMBX (commercial mortgages) or generic corporate bonds or junk bonds, the spreads just widened with an irrational apathy."
Santelli said many of the indices were at their worst levels ever. "We're going through a period where there's a lot of active liquidation going on," he said.
The Dow Tuesday was down more than 200 points but rebounded toward the end of the day after CNBC's Charlie Gasparino reported that bond insurer Ambac is progressing towards a bailout deal.
The Dow ended down 45 at 12,213, a 0.4 percent decline. The Nasdaq was up 1.68 points, or 0.1 percent, helped by late afternoon news from Cisco CEO John Chambers, who says he's sticking to his forecasts. He also said his company will hit some "bumps" in the U.S. economy but they are likely to be short-lived. The S&P 500 was off 4.59 points or 0.3 percent.
One of the big negatives was Citigroup, which a Merrill Lynch analyst said could take another $18 billion writedown in the first quarter. Citigroup shares, for the first time in more than a decade, traded below book value as investors worried about its capital levels.
The dollar fell another 0.2 percent against the euro but gained 0.1 percent against the yen. Some commodities markets saw selling Tuesday, with gold down $17.60 per troy ounce or 1.8 percent to $963.90. Copper fell 10.40 cents per pound, or 2.6 percent.
Oil tumbled 2.9 percent to $99.52 per barrel. Oil inventory data is released Wednesday, and OPEC meets. OPEC officials have signaled they would hold output steady. Gasoline, meanwhile was down 14.29 cents or 5.3 percent, to $2.5291 per gallon.
John Kilduff, a senior vice president f M.F. Global, said it may in fact be gasoline that helps reverse the recent move up in oil prices. "There's tremendous weakness basically be cause of supply even with refinery runs being down around 84 percent," he said. Kilduff says he expects another run up at the pump because of the switch over to summer blend gasoline. But then, he says, prices could come down.
"We have 232 million barrels which is the highest level in more than 10 years," he said.
Risk Radar Flashing UBS global strategists have a risk aversion measure that was created in 1992. In a note today, they noted that risk aversion is closing in on 1998 levels. Starting in July 2007, the UBS index was in risk averse territory for 26 out of 32 weeks. When it fell into extreme negative territory in 1998, it was there for 31 weeks. The worst period so far was the time between 2000 and 2003, when the index was negative 88 percent of the time that UBS took its measure.