CNBC's Domm: Intraday Volatility Will Be A Theme For 2007

Stocks look set to open lower as concerns about the direction of interest rates hangs over the market. Yesterday's turbulent move in stock indexes came on a wave of record trading volume. Some traders are telling us the high level of intraday volatility will be a theme for 2007 after a period of relative calm. Investors Intelligence meanwhile issues its latest poll showing a decline in bullishness to 55.3 percent from 56.5 percent. Bearish sentiment rose to 21.3 percent from 19.6 percent and those expecting a market correction fell to 23.4 percent from 23.9 percent.

Corporate news and fresh economic data should grab attention today as investors continue to debate the Fed comments from yesterday. European markets are lower, with commodity driven stocks leading the decline. Copper continues under pressure and trades at a nine month low though oil is firmer after its 4.5 percent drop yesterday on warm weather. The Department of Energy late yesterday said it would not revise inventory data from last week, a move some traders were expecting and one that could have depressed prices even further. Tokyo's stock market closed higher on its first trading day on the weaker yen.

HOLIDAY CENTRAL Retailers report same store sales for December, and this will be the big report card for the holiday season. So far, Wal-Mart's early release on the weekend showed the retail giant beat its own weak forecast and scored a surprising 1.6 percent gain. Warehouse club Costco this morning said its sales were up nine percent.

SAME TUNE, DIFFERENT LYRICS The Fed spooked stock traders yesterday when it indicated it intends to maintain its battle against inflation and cautioned on risks to economic growth. Suddenly, the idea that the Fed could cut rates sometime this year was seemingly overtaken by a mass vision of the Fed wringing out inflation with higher rates. The Dow tanked after the 2 pm FOMC minutes but managed to eke out a slight gain on the day. According to our friends at Dow Jones, the NYSE volume of 3.4 was the second highest ever.

Jordan Kotick, global head of technical analysis at Barclays Capital, said the market was set up for the midafternoon sell off and the Fed's comments were probably not the only factor. "It's not necessarily what's in the Fed minutes. it's the expectations of the Fed minutes," he said, noting the selling began before the 2 p.m. report. "The Fed just exasperated something that had already begun." Kotick appeared on Closing Bell yesterday.

Cooler heads seem to prevail in the bond market yesterday. Today, traders will be watching initial jobless claims, factory orders, non manufacturing ISM, and pending home sales.

BACK IN TOWN The new Democrat majority Congress convenes today with the first woman, Rep. Nancy Pelosi, taking her place as speaker of the house. Chancellor Merkel of Germany meets with the President later today and hopes to discuss an improved economic partnership, according to her interview with the FT yesterday.