Tuesday's sideways market was not nearly as exciting as recent sessions, but traders were encouraged by the market's ability to hang on in the face of bad consumer data and weak housing news.
Wednesday's market has a few data points to watch -- durable goods at 8:30 a.m. and new home sales at 10 a.m. Oil and gasoline inventory data is released at 10:30 a.m.
Treasury Secretary Hank Paulson speaks on the markets and the economy at 10:15 a.m. at the U.S. Chamber of Commerce Capital Markets Summit in Washington (CNBC.com is scheduled to carry a live stream of the feed). Fed speakers include Chicago Federal Reserve President Charles Evans who speaks on the economic outlook in New York at 12:30, and Dallas Fed President Richard Fisher who discusses the Fed and the regional economy in Waco, Texas at 1:30 p.m. Both will take questions.
Well ahead of the open, Bank of England Governor Mervyn King and European Central Bank President Jean-Claude Trichet give separate testimony on the state of their economies. King will be questioned by British members of Parliament in London and Trichet testifies before EC officials in Brussels.
Earnings Central
Oracle's earnings are reported after the bell Wednesday, and the stock has been surrounded by optimism the earnings will be stronger than expected. Oracle shares (and options) have been on the move, with the stock up 1.5 percent Tuesday.
"If it is a very good number, you'll probably see a lot of other blue chip tech stocks react well to that," said Brian Rauscher, director of portfolio strategy at Brown Brothers Harriman. Rauscher said if it's not good, it could trigger a negative reaction across tech stocks, as it will be viewed as a barometer for tech spending.
I spoke to Rauscher today about his expectations for the first quarter earnings season, which he says will not be as weak as headline numbers suggest. He says without financials and homebuilders, S&P 500 operating earnings per share should be up 9 to 11 percent. With them, S&P earnings are expected to be down 12.3 percent.
"People are focusing too much on the financials and home builders earnings by themselves. When you look outside that space, the earnings have not been that bad in my opinion," he said.
Seven of the 10 S&P sectors should show earnings growth of at least five percent while the average for S&P earnings growth has historically been seven percent, he said. Energy companies are the stand out and are expected to show growth of 30 percent for the quarter. "For a market that's only trading at 13.5 times forward earnings, that's not the end of the world," he said.
"It's our view there are pockets of strength out there. For people who believe earnings are collapsing, that's not the case," he said. If the economy takes a turn for the worse, that story could change. He currently expects a sluggish economy but not a protracted recession.
Rauscher said the guidance from companies this earnings period will be even more important than usual. "The absolute level of earnings will be fine and what will really drive the market is what they say about forward guidance," he said. "The last couple of quarters were ok, but companies didn't give a very rosy outlook."
"Warning season," when companies reveal earnings surprises, will soon be upon us once the quarter closes March 31. In the past week, analysts raised their estimates on energy, industrials, IT and consumer staples companies, he said.
Rauscher says he is skeptical of the sustainability of the market's current rally because the problems confronting the markets have not been solved. " Could the market go down and retest the low we had in January and March? Absolutely. Do I think it could go much below that. That is less likely," he said. He did say it is a good time for investors to be nibbling at select stocks
Crunched
Clear Channel , may become the latest deal casualty of the credit crisis. Financing for its $19 billion privatization deal looks to be near collapse. According to the Wall Street Journal, sources said private equity firms and banks failed to reach an agreement on the credit agreement. The stock was hammered in after hours trading though risk arbitrageurs who invest in takeovers, were not all that surprised and said attention will now turn to some other pending deals.
"The banks have been against this," said one arb. The Journal said private equity firms Thomas H. Lee and Bain Capital were pitted against the banks over details in the credit agreement. The banks include Citigroup, Morgan Stanley, Deutsche Bank, Credit Suisse, RBS and Wachovia.
Mellow Market
Traders will continue to look for proof that the market is forming a bottom, or not. On Tuesday, BlackRock Vice Chairman Bob Doll was the latest to say it appears the market successfully retested lows last week. In an unofficial survey of Marketinsider readers, 64 percent of more than 500 readers say it's time to buy stocks. Twenty-seven percent say it's not time to buy, and about 8 percent said it's time to sell.
CNBC's chief number cruncher Ariel Nelson, who authors the By The Numbers blog, looked at market behavior at the end of recessions (not saying we're there) and after market turns. He found that when the market turns from a trough, it's best performance of the first year is in the first three months.
Stocks turned in a mixed performance Tuesday after with the Dow down 16, the S&P 500 up 3 and the Nasdaq up 14.
The dollar weakened, falling 1.2 per cent to $1.5611 against the euro and 0.6 percent against the yen . Commodities reversed course with energy, metals and agritcultural commodities all gaining after the bout of heavy selling in recent sessions. Oil rose $0.36 per barrel to $101.22. Gasoline gained 1.5 percent to $2.6802 while heating oil rose 1.3 percent.
Silver was up 4.1 percent at $17.7620 per troy ounce, and gold was up 1.8 percent or $16.30 per troy ounce to $934.60.
Half Full
Sometimes it's the contrarian views we hear that make the day more interesting. That certainly is the case with some comments we heard on the dreadful collapse in consumer confidence readings to a 35-year low. Michael Darda, chief economist at MKM Partners, was one of those that looked at the silver lining.
"... large declines in consumer attitudes can be coincident with recessions as was the case in 1973-74, 1990-91 and 2001. However, investors would be wise to use such readings as contrary indicators, as the average stock market gain in the six months after the trough in consumer expectations has been nearly 30 percent in the three decades for which we have data," he wrote.
The question though is when will consumer confidence trough? Darda said confidence was hit by falling home prices, rising energy prices and the weak stock market. The Conference Board Consumer Confidence Index fell to 64.5 in March from 76.4 in February. Forward looking consumer expectations fell to 47.9 , the weakest reading since 1973-74.
Merrill Lynch's David Rosenberg took a different spin on the data, warning that the poor consumer confidence reading signals a coming contraction in consumer spending.
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