Sloppy and choppy was the market trend Tuesday, and there's signs it could continue into Wednesday with no economic data on the horizon to drive stocks.
But there is oil inventory data at 10:35 a.m., and with oil prices the biggest economic indicator of all lately, stock traders will be watching the energy market carefully to see if the weekly data moves crude. Platts survey of analysts shows expectations for a draw down of two million barrels of crude last week and increases of 950,000 barrels of gasoline and 1.8 million barrels of distillates.
There are also earnings from Morgan Stanley and FedEx . FedEx is expected to show the impact of high fuel costs on its margins, and its shipping business too will be watched as an indicator of economic activity.
Fickle on the Financials
The group the market loves to hate dominated trading Tuesday and could again Wednesday. Morgan Stanley's second quarter earnings report follows on better-than-expected results from Goldman Sachs Tuesday. Goldman's stock though lost its early gains, and the entire financial sector took a nasty beating. The sector was 2.9 percent lower on the day.
Not helping the group was a report from Goldman Sachs analystswho said banks need to raise another $65 billion to cover losses and the losses in the sector will not peak until 2009.
Saudi Spigot
Economist Jared Bernstein of the Economic Policy Institute says he's watching those oil inventory numbers Wednesday. He said oil is trading like it's in a bubble. But he thinks we are in for a period of high prices even if it does come off its highs, and that will drag on the economy.
"I'm looking at a period where the economy kind of creeps along where it's been for awhile," he said, describing the economy as moving in an "L" shape, a period of below trend growth. "I don't see energy prices letting up but I wouldn't bet a lot on it because we've been surprised before."
Bernstein, a CNBC contributor, says there's a lot of calls for new drilling, yet he thinks that conservation is one easy way to cut demand and prices. President Bush Wednesday is expected to call on Congress to approve legislation to lift the ban on offshore drilling.
M.F. Global senior vice president John Kilduff said the energy market is also looking past the inventory data to the weekend meeting of major oil producers and consumers in Saudi Arabia.
"I think the Saudis are going to announce a number of things. They'll increase production, give further discounts on the sour (crude), and they're going to give some details on the new field that's coming on," he said. He said they will come up with a "harder and faster" production schedule and outline plans to add refining capacity.
Interestingly, Kilduff thinks they could talk up the dollar. "I think they're going to call for some kind of action on the dollar but maybe not as far as intervention," he said.
Also in the News
San Francisco Fed President Janet Yellen speaks at 11:45 a.m. at a Fed conference on "The Changing Landscape: Asia's Rose in Global Finance."
In Washington, President Bush meets with the Chinese delegation the U.S.-China Strategic Economic Dialogue on their second day of meetings. Treasury Secretary Hank Paulson said he hopes the U.S. and China can cooperate on energy and the environment at the start of the two days of talks, and a Chinese official said that China intends to make energy prices better reflect market fundamentals.
Government subsidies have been blamed for keeping global energy prices high.
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