Market Insider: Wednesday Look Ahead

Stocks could slog around again Wednesday as the final days of summer fade and trading volume fades away as well.

"For the next few days, we'll drift back and forth, and it won't mean a lot," said UBS head equities block trader Robert Harrington.

Tuesday's market was punctuated with more bleak news on housing and banking. The S&P/Case Shiller home price index showed a 15.9 percent drop from a year ago, but some price declines were seen as moderating.

In mid afternoon, the FDIC said that 117 banks were on its watch list at the end of the second quarter, up from 90 at the end of the first quarter. Banks also set aside $50.2 billion in loan loss provisions during the second quarter, up from $11.4 billion in the year earlier period.

On Wednesday's economic calendar, durable goods data is due at 8:30 a.m. Also, Atlanta Fed President Dennis Lockhart is scheduled to speak about U.S. inflation at Georgia State at 8:30 a.m.

Market Doldrums

Stocks were slightly higher Tuesday with the Dow finishing up 26 points, the Nasdaq off 3.62 points and the S&P up 4.67. Stock traders are keeping an eye on energy markets, which moved higher as a quickly developing Hurricane Gustav looked set to move into the Gulf of Mexico over the Labor Day weekend, threatening oil and gas production areas. Not surprising, energy stocks were the top performers, gaining 1.8 percent.

Traders say Gustav could be the biggest threat to Gulf oil facilities since hurricanes Katrina and Rita in 2005.

"You have a lot of people on vacation. I don't think there's a lot of conviction about what's going to happen in the near term," said Harrington of the stock market. He said the same old issues face the market, including the soured housing and credit markets. Institutions continue to deleverage and Fannie Mae and Freddie Mac are on the horizon as major issues.

"Money is lining up to buy mortgage assets as cheaply as possible. I still think there's a lot that has to go on there," Harrington said. But he added buyers are moving slowly. "It's hard to come flying in after equities when you know there are these other assets that are rather cheap, and you have people that want to sell them so they can start over again. It's hard for me to get too optimistic about stocks."

Oil Drill

Weekly oil and gasoline inventory data is released at 10:35 a.m. Platts analysts' survey shows crude oil stocks are expected to be up by 1.5 million barrels, and gasoline stocks are expected to have dropped by 2.8 million barrels. Distillate stocks are expected to have risen by 900,000 barrels.

Crude futures finished up $1.16 per barrel to $116.27, after rising above $117 on Tuesday. Natural gas futures were nearly 6 percent higher, closing at $8.728 per million British thermal units.

The dollar gained 0.74 percent against the euro to a level of $1.4645.

Stocks to Watch

J.Crew, after the bell, saw its stock take a hit after it reported second quarter net of $18.1 million, down from $20.6 million. The company warned its third quarter and full year results would miss targets and said a system upgrade disrupted its phone and internet sales trend.

Borders Group, on the other hand, rose after it reported a narrower loss for the second quarter.

Petrochina reports earnings overnight, and Dollar Tree reports ahead of the bell.

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