Fed speakers and oil’s bounce: Here’s what could drive the market on Friday

After emerging market equities took a blow in Thursday's trading session and crude oil enjoyed a bounce, Washington Crossing Advisors portfolio manager Chad Morganlander breaks down three key catalysts for the week's final trading day.

1. The emerging market trade

One popular emerging markets exchange-traded fund, the EEM, fell nearly 2 percent on Thursday. Brazilian equities, which logged their worst day in nine years on the back of a striking political scandal in the country, dragged down the fund. Morganlander is watching emerging market equities in the wake of Thursday's action, with a particular eye to China, which makes up the bulk of the fund.

In China, "I do believe that there's going to be a deceleration of credit growth, and that also is going to affect the markets," he said Thursday on CNBC's "Trading Nation."

2. Fed speeches on tap

Two Federal Reserve regional bank presidents are set to deliver speeches on Friday, and Morganlander is watching both for signals as to how the central bank will begin reducing its balance sheet.

Federal Reserve Bank of St. Louis president James Bullard is scheduled to speak in the morning at the Association for Corporate Growth St. Louis Chapter on U.S. economy and monetary policy; Federal Reserve Bank of San Francisco president John Williams is scheduled to speak in the afternoon to high school students in South San Francisco.

Neither currently has a vote on the Federal Open Markets Committee, but their words could provide clues to the Fed's next move.

"We believe that any strong language there could perhaps give a little bit of a signal to the market and that could affect interest rates as well as equity prices," Morganlander said.

The market is currently pricing in a 74 percent chance that the Fed will hike rates at its June meeting, according to CME Group's FedWatch tool.

3. Crude oil

Crude oil has rallied over the last week, and Morganlander believes that Friday is going to be a "critical" day of trading for the commodity.

Russia and Saudi Arabia last weekend reached an agreement to extend OPEC output cuts through March 2018, which sent crude oil prices higher. Concern over increasing U.S. shale production, however, has capped the gains. Morganlander is bearish at these levels.

"We think that potentially oil can roll over again, and you can start to see selling pressure going into not only Friday but next week and the following week. We'd stay clear of oil," he said Thursday.

OPEC members are set to convene next week.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more

Connect