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Crude oil, US dollar could drive stocks on Tuesday

In a pre-earnings season vacuum, oil prices and the dollar could drive stocks Tuesday.

Oil surged more than 6 percent Monday, and helped boost the stock market as the S&P energy sector jumped 1.8 percent. The U.S. dollar index started out the day lower, and was a catalyst for the stock market's gains, though it edged higher and ended the day barely changed.

"These are the two catalysts that are going to be with us, and we're not getting any real news on the economic front," said Art Hogan, chief market strategist at Wunderlich Securities. "What the dollar's representing us with now is more stability than anything." He said the euro-dollar is now in a range of $1.06 to $1.10.

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange.

The rising dollar has been negative for stocks because it can put a dent in the earnings of multinationals. The dollar and falling oil prices have both been major factors behind the near 3 percent decline expected in earnings this quarter, the first drop in six years.

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Oil's price collapse this year has also held back stock market gains, and Monday's rally encouraged some traders who have been hoping to see a bottom soon in the price of crude. West Texas Intermediate futures for May delivery jumped 6.1 percent to $52.14 per barrel.

Oil rose in its biggest one-day gain since February on reports that supplies fell in Cushing, Okla., the physical storage hub for Nymex futures. Speculation that Cushing facilities would soon be full, sending more crude back onto the market has weighed on prices recently. Government data on supplies is released Wednesday morning.

Stocks rallied Monday on the view that weak economic data could keep the Fed on hold longer, even stock futures initially fell sharply in reaction to Friday's weak jobs report.

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Bond yields also rose after ISM nonmanufacturing data Monday came in close to expectations, after a series of economic reports missed the mark recently. The highest profile miss was Friday's March employment report, with just 126,000 nonfarm payrolls – about 120,000 less than expected.

There are no clear catalysts on the economic calendar Tuesday, with just the monthly report on job openings and labor turnover at 10 a.m. ET and consumer credit at 3 p.m. There is also a 1 p.m. auction of $24 billion in 3-year notes.

The JOLTs report is a favorite of Fed Chair Janet Yellen, for its detail on workers who quit and find new jobs. Even though payrolls disappointed, the average hourly wage component rose by a surprise 0.3 percent. Economists have been watching for any sign of rising wages, as that is something that could ultimately signal inflation and bring the Fed off the sidelines.

JOLTs could help provide more details on wages, according to Deustche Bank chief U.S. economist Joseph LaVorgna.

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"The two most important series in the report are the hiring rate and the quits rate," wrote LaVorgna. "Both are leading indicators of wage costs…When people voluntarily quit their job, it typically presages an increase in the ECI (employment cost index). At present, the quits rate is 2.0 percent, matching its high for the cycle. If the quits rate continues to grind higher, we should see more evidence that the ECI is trending upward, as well."

Dave and Buster's reports earnings Tuesday, and on Wednesday, Alcoa reports earnings and heralds the start of the earnings reporting season. Next week, major banks and technology companies report.

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