Weekly jobless claims should get more attention than usual Thursday, after two weeks of backtracking.
Claims are expected to come in at 450,000, after last week's disappointing 484,000. The Labor Department has blamed the higher numbers on seasonal factors, including the Easter holidays, and Thursday's report could be similarly affected.
"If we have three weeks in a row of jobless claims closer to 500,000 than 400,000, it really could put some doubt in people's minds," said Boris Schlossberg of GFT Forex. "If equities sell off, it could be dollar positive..The critical question is whether (the recovery's) sustainable."
The latest jobless claims data, while volatile, has not, in the minds of some traders, confirmed the March jobs report, which showed an increase in non farm payrolls of 162,000. That employment report, together with a string of improving economic reports, has injected a sense of confidence about the recovery into markets. Yet, consumer sentiment readings have sagged.
Richard Bernstein of Richard Bernstein Capital Management says jobless claims are one of the most important indicators he watches. "If jobless claims continue to improve, this bull market will continue," he said, in a recent interview. Bernstein also says the bears will come roaring back if there's a serious, extended reversal.
Producer price inflation data is also reported at 8:30 a.m., when the jobless claims data is released. Existing home sales data is another big report for markets, when it is released at 10 a.m. FHFA home price data is also released at 10.
Stocks were little changed Wednesday, after trading in a tight range most of the day. The S&P 500 was down 1 at 1205, while the Dow was up 7, at 11,124. Some individual stocks, however, were standouts as earnings news propelled them. Apple was 6 percent higher, EMC was 2.3 percent higher, and Boeing was nearly 4 percent higher.
Earnings will be a big story again on Thursday, when Pepsi, Nokia, Blackstone, Continental Airlines, Verizon, AutoNation, Diamond Offshore, Marriott, Sherwin-Williams, Raytheon, Hershey, Kimberly-Clark, Union Pacific and Textron report ahead of the bell, along with dozens of other major names. Amazon.com, American Express, Microsoft and Chubb report in the afternoon.
As of Wednesday morning, 98 S&P 500 companies had reported, and 85 percent of those had better than expected earnings, while 66 percent beat revenue estimates, according to Thomson Reuters.
Harris Private Bank Chief Investment Officer Jack Ablin said typically 66 percent of companies beat earnings estimates, on a historical basis. Ablin says earnings are helping the market, which still has a ways to run. He sees another 10 percent move higher before the market pulls back in the second half. "It continues to battle bad news during the day and then ends the day higher," he said.
He expects the market to hit a snag if the Fed signals it is getting closer to raising rates, some time in the second half. He said this could be the case after several months of much improved jobs data.
Ablin said the market in the near term may not react well to financial regulatory reform, which is winding its way through the legislative process. Democratic Senators could move Thursday on a procedural step towards legislation, as they continue negotiating toward a compromise with Republicans. The Senate Agriculture Committee, meanwhile, voted Wednesday for a bill that would require most derivatives trades to go through exchanges or clearing houses; eliminates swap trading at banks and adds new oversight to the derivatives market.
President Obama, meanwhile, takes his campaign for regulatory reform to lower Manhattan, where he will speak just before noon.
"If the market can battle through that, that'll be a huge plus, a huge milestone," said Ablin.
Financials have had a series of set backs in the past few days, though good earnings reports have helped counter that. The stock market initially sold off when the SEC announced fraud charges against Goldman Sachs Friday, but it has since drifted higher. "It doesn't sound like it's a solid enough case to bring down the firm but it could tarnish its reputation," Ablin said.
Financial stocks Wednesday were among the three weakest performing sectors. The S&P financial sector was down 0.5 percent. Health care, meanwhile, was the worst performer, declining 1.8 percent on concerns new regulations will hurt the industry's profits. Gilead and Abbott both cut their full year outlooks, citing health care reform.
Ablin said health care is a sector he is watching. "If health care started to move, I'd get interested, but unfortunately they keep getting cheaper. Health care relative to its peers is the cheapest it's been in a decade," he said.
"The only problem with that is cheap markets can get cheaper," he said.
In the S&P 500, more than 70 stocks made new highs Wednesday. Many of those stocks, ranging from Boeing, Honeywell, Wells Fargo, Northrop Grumman and United Technologies are trading at 2008 prices. However, several were at highs last seen at the start of the decade. Those names include BMC, Citrix, and Altera. Apple is an all time high, since its IPO in December, 1980, and Amazon.com is also trading at the highest level since it went public in 1997.
Ablin said the recession has been a time of shakeout for companies. "In many respects, this downturn has been cathartic for companies. It allows the survivors to thrive," he said, pointing to Best Buy versus its now out-of-business rival, Circuit City.
What Else To Watch
Greece is talking to the IMF, EU officials and the ECB about a rescue package. Yields on the Greek 10-year jumped to a high above 8.25 percent Wednesday.
"What the market is skittish about is that there isn't the unified political force that will provide a long term solution to this," said Schlossberg. He said the EU has been willing to lend to Greece, but at "loan shark" rates.
He also said the markets will be watching PMI data from Europe Thursday. "We have PMI manufacturing and services data. it gives you the latest snapshot of economic activity in the euro zone," he said.
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