Market Insider

Look Ahead: Retail Sales, Jobless Claims & Intel in Focus

lntel's after-the-bell earnings will be a high point Thursday, providing a window on how tech could perform for the fourth quarter.

New York Stock Exchange

But before that, markets will consume retail sales data and jobless claims at 8:30am, and business inventories at 10am. There is also an auction of $13 billion in 30-year bonds at 1pm.

Stocks Wednesday drifted higher, as investors moved money into tech and financials, both hit by recent selling bouts. The Dow gained a half percent, or 53 points to 10,680, its highest close since Oct. 1, 2008. The S&P 500 rose 9 to 1145, giving it a 2.7 percent gain year-to-date.

The tech group was up nearly a percent. Intel was one of those that moved higher. Analysts expect it to earn $0.30 per share for the fourth quarter, up from $0.04 per share in the year earlier. Revenues are expected to rise to $10.2 billion from $8.2 billion last year.

What Else to Watch

The Financial Crisis Inquiry Commission will continue its hearings on the cause of the financial crisis. Among Thursdays' speakers are SEC Chairman Mary Schapiro and FDIC Chairman Sheila Bair, as well as Attorney General Eric Holder.

President Obama is also expected to introduce a new plan to tax the biggest financial institutions to cover losses from the Troubled Asset Relief Program.

RBC bank analyst Gerard Cassidy said the tax proposal could be veiled punishment for the banks' bonus policies.

"What I'm going to suggest is this tax is outrageous if they are going to claim it is for the cost of the TARP. What we're going to find with the TARP five years from now is that for the money that went to commercial banks, the American taxpayers will have made money on that investment," he said.

However, the same probably will not be said of the money that funded the car industry or AIG.

"I would suggest the biggest issue confronting this industry today continues to be credit problems, and although this tax is going to be painful, it is not a killer," Cassidy said, adding that bank stocks may not recover as much because of the tax.

Chief executives of four of the biggest banks appeared before the financial inquiry commission Wednesday.

"Unfortunately, I think they are going to lambaste these banks and these players more than some of the other culprits out there. To blame it just on the banks I don't think is right," Cassidy said, noting regulators, borrowers and mortgage bankers could also share the blame.

"Are you going to pick on a regulator making $50,000 a year, working in Cleveland, who could have been just as guilty, as opposed to a Wall Street trader making $2 million a year? Everyone's going to go after the trader," he said.

Cassidy said he is watching for JPMorgan's   earnings report Friday as a read on how the entire industry fared in the fourth quarter.

"They will be the bellwether for this quarter. The tone that they set and the candor that management team has with investors will set the tone for the whole quarter," he said. If they have a positive report and see improvement, "that will lift all the banks stocks."

Cassidy also pointed out that a part of the financial sector is outshining the rest. "Commercial banks are outperforming the S&P for the first time in five years," he said. He noted many are up about 10 percent since Jan. 1, while the broader financials are up about 5 percent in that period.

Included in that group would be PNC, KeyCorp, SunTrust and BB&T, as opposed to the widely held major banking names like JPMorgan, Citigroup

or Bank of America.

Cassidy expects that trend to continue.


Thursday's data will be important as a guide to the fourth quarter's GDP, according to Deutsche Bank chief U.S. economist Joseph LaVorgna. He said he may make an adjustment after the business inventories and December retail sales reports.

"I think 4 (percent) is the floor," he said.

For retail sales, he expects an increase of 0.6 percent, weaker than November's 1.3 percent increase. Without autos, he expects 0.5 percent. He said when the numbers are tallied for the holiday season, the results could be a bit better than expected.

"The issue now going into 2010 will be the sustainability of consumer spending," LaVorgna said.

For weekly jobless claims, he expects a total of 430,000 new claims, off slightly from last week's 434,000. "My guess is the claims numbers are going to continue to trend lower. If we get a surprise, it will be to the downside," he said.

S&P Lowers California Debt Rating

California Dreaming?

As emerging market investors continue to worry about Greece's sovereign debt, a half a world away California's problems are causing new concern.

Standard & Poor's Wednesday lowered its rating on California's $64 billion general obligation debt from A to A-, the lowest rating for any state. It also dropped $9 billion in A- lease-revenue bonds to BBB-.

S&P said the state will face cash shortages in March and July and that Gov. Arnold Schwarzenegger's plan to close the state's $20 billion deficit depends too much on federal help.

Pimco's Bill Gross was asked about his view of California's bonds. "I wouldn't buy them. I wouldn't buy most municipals because their deficits... are in the $200 to $300 billion, for a two-year time-frame, camp," he said.

"That's a lot of deficits that has to be closed via, yes, the government spending programs that have been part of the past 12 months and we need to see it again.

"To a certain extent, the 'Governator' was right, because California and other states are paying a huge burden in terms of Medicaid, and we need to get some relief there," Gross said.

"Until we do, the fiscal stability of California and other states is in question."

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