Market Insider

Friday Look Ahead: Market Awaits Consumer Reports


A batch of consumer and inflation data could help determine how a wobbly stock market will finish out the week.

Retail sales are reported at 8:30am ET and are expected to be up 0.5 percent, after a 0.5 percent decline last month. Consumer inflation data — the consumer price index (CPI) — is also reported at 8:30am, and consumer sentiment is released at 9:55am. Business inventories are released at 10am.

J.C. Penney reports earnings ahead of the opening bell, and investors will still be looking over Nordstrom, which fell in the after-hours Thursday.

Nordstrom reported profits of $146 million, or $0.66 per share, up from last year's $105 million, or $0.48 per share, and in line with expectations. It did not raise its 2010 profit outlook.

Investors will also be watching for word on GM's IPO, expected to be announced shortly.

The Dow lost 58 points Thursday to 10,318, after Wednesday's big downdraft. The Nasdaq was down 18 at 2190. The S&P 500 was down 5 at 1083. Treasurys were bid lower after their recent run up. The yield on the 10-year edged lower to 2.745 percent and the 30-year bond yield rose slightly to 3.949 percent. Worries about the economic recovery weighed particularly hard on oil, down 3 percent to $75.74 per barrel, its lowest price in a month.

Cisco, which had disappointing earnings Wednesday, was down about 10 percent, and hung like a cloud over tech stocks, the worst performing S&P industry sector. Tech was down 1.7 percent, followed by the industrials, off 0.8 percent and financials, off 0.6 percent. Telecom was the best sector, up 0.9 percent.

"It's the same lack of volume. Yesterday just had a tad bit more emotion," said Pete McCorry, who trades bank stocks at Keefe Bruyette.

"We're going to be in a trendless trend, range bound until we get some volume confirmation, one way or the other," he said. "I think people are on the sidelines. We went from legislative risk to political risk with the elections coming up, and those are keeping people watching rather than buying. The appetite for risk is minimal right now."

The corporate bond issuance wave continued Thursday, though the market's negative early tone kept activity quieter. According to Thomson Reuters IFR, there was about $1.4 billion investment grade debt issued Thursday, including Johnson & Johnson's record 10-year and 30-year deals. The yield on its 10-year debt was 3.18, an all time low, and the 30-year was to yield 4.626 percent.

The total issuance for the week is now $18.8 billion, making it the fifth double digit week in a row. It's been the busiest deal week ever for high yield corporates, with $13 billion in new issuance. The last record week was in March and issuance totaled $11.7 billion.

"It's a sign of the times," said Nomura Americas Treasury strategist George Goncalves.

"Fixed income is where money's been flowing to. It hasn't stopped, in Treasury, agencies and corporates, and won't so long as rates are at zero and companies are able to roll over their debt at attractive levels to investors."

Goncalves said the government's auction of $16 billion in 30-year bonds went well Thursday.

"Today's 30-year was one of the best on record. At a time when yields are very low, people have been on the sidelines waiting to buy and these auctions provided them opportunities this week," he said. "I think a lot of people were on the sideline waiting for higher yields."

He predicts the 10-year yield will stay at a new lower range of 2.5 percent to 3 percent, for now. The Fed's move to quantitative easing this week will keep rates low for a long time.

"They're putting a stranglehold on rates to buy they can buy time to cure all the bad loans in the world..That's what it feels like to me. It's going to be hard to fight the Fed," he said.

Follow me on Twitter @pattidomm.

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