Market Insider

Here's what traders will be watching before they head to the beach

One of Allianz Global Investors' top strategists argues a market melt-up is coming, but it may not last as long as you think.

With an early close for bond trading, markets are expected to be quiet Friday, with just consumer sentiment and another look at first-quarter GDP ahead of the long Memorial Day weekend.

Traders have also been hanging on the idea that Fed Chair Janet Yellen will discuss policy when she is at Harvard University on Friday afternoon to receive the Radcliffe Award, but Fed watchers doubt she will. Yellen will also be questioned by Harvard professor and economist Gregory Mankiw at 1:15 p.m. EDT. Yellen is slated to speak on the economy on June 6, and economists expect her to use that speech to send a message on policy instead.

Read MoreThis may be the tell-tale sign the Fed is about to hike rates

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"I would be surprised if she'd use that forum to provide any kind of Fed speak out of character with what the minutes said or what other Fed officials said," said Mark Luschini, chief market strategist at Janney Montgomery. " I hold no view that she signals anything one way or the other tomorrow. There's no way."

Justin Lederer, rate strategist at Cantor Fitzgerald, said the Treasury market could react to the revised GDP if it's a surprise. He said end of month trading activity could affect prices, since there will only be one trading day left in the month after the long weekend.

Economists expect first-quarter GDP to remain under 1 percent, at 0.9 percent. "I think there will be a little volatility in the morning. We'll see how the GDP pans out," he said. The Treasury cash market closes at 2 p.m. EDT. Besides GDP at 8:30 a.m. EDT, there is consumer sentiment at 10 a.m.

The two sectors that could drive the market

Stocks closed mixed Thursday, with the less than a point lower at 2,090, a key resistance level. The Dow was off 23 at 17,828, while the Nasdaq ended higher up 6 at 4,901. Oil crossed above $50 for the first time in seven months, but slipped, and West Texas Intermediate futures were at about $49.40 per barrel in late trading. Treasury yields gave back some of the week's gains, and the was at 0.86 percent.

"This [stock] market is poised to decide which way it wants to break, and I think it's desperate for a catalyst. Absent any news, I think it's more of the same. It is both interesting and somewhat frustrating that you can have news that seemingly on balance was not that good and the market seems to have completely shrugged it off," said Luschini. He noted that the durable goods report Thursday, while better on the headline, was weak on the numbers that reflect business spending.

"It seems to me the market wants to go higher and is looking for a tangible catalyst," he said.

The G7 summit begins in Ise-Shima, Japan, on Friday. President Barack Obama and leaders of other G7 nations will attend.

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