Thursday Market Lookahead

Thursday's markets promise to be anything but calm as traders sift through Wednesday's rubble.

Wednesday was the first trading day of 2008, and already it feels like it's the year of commodities. In a wild day, commodities were the clear winners and stocks, as you guessed, were the biggest losers. What incredible action there was in energy, metals and grains.

While commodities broke more than a few records, stocks set a record of their own: the worst performance for the first trading day of the year since 1983.

Look at the Wednesday moves. Oil soared, crossing the psychologically important $100 mark for the first time on dollar weakness and on reports of violence in Nigeria.

Gold set a new record in the spot market, and gold for February delivery settled at $860 an ounce. April Platinum hit a contract high. March silver was at its highest level since mid-November. Wheat futures rose to the daily limit, and corn and soybean prices were at multi-year highs. And that's just some of the action.

As the dollar sunk, it drove commodities higher and sparked new fears of inflation and a slowing economy. Those worries weighed on stocks, already lower on weak ISM manufacturing data. The dollar hit a new low of $1.4865 dollars per euro, and Treasurys, in a flight-to-safety move, saw yields decline as buyers moved in. The 10- year was at 4.024 percent, its lowest yield since September 2005, and the two-year was yielding 3.038 percent.

The Dow fell 220 points or 1.67 percent, its biggest first day drop since 1983's 1.86 percent decline. The S&P 500 was off 1.6 percent at 1,416, and the Nasdaq was 1.3 percent lower at 2,562. Of the S&P sectors, energy was the only stock group to close higher as oil shares rallied around record oil prices. The group was up 0.63 percent.

A big topic on the agenda Thursday is the Presidential election, which is beginning to catch the market's attention. The Iowa caucuses are being watched carefully to see who voters in that state see as the front runners from each party. You can bet we'll hear more about those record high oil prices from the candidates.

There are a few key data items Thursday. Oil inventory data is released at 10:30 am and could be a big market mover. Weekly jobless claims are released at 8:30 and factory orders are due at 10 am. We will get auto sales results for December, a good indicator of the state of the consumer.

Dennis Gartman of the Gartman Letter told "Fast Money" Wednesday he thinks the bullish trend is in place for gold and oil. He also said he is long the grains.

"Oil first, Nigeria second, weak dollar third. Give me those three things and I've got gold up $20," he said.

"(Gold) broke out a week and a half ago. Anybody who thinks that trend is going to stop any time soon is wrong. That is a bull trend. Gold has become the third major currency in the world. Dollar first. Euro second. Gold is the third reservable currency and it's trending upward," said Gartman.

Questions? Comments?