Market Insider: Thursday Look Ahead

Retailers' January sales reports can't help but unleash a plethora of bad news ahead of Thursday's market open.

Stocks will also absorb whatever shocks there may be in weekly jobless claims data and the morning's batch of earnings reports. Companies reporting include Kellogg, MasterCard, Duke Energy, GlaxoSmithkline, Cigna and Tenneco. A negative for the market may be Cisco's disappointing sales forecast, released when it reported earnings after Wednesday's closing bell.

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On the economic front, productivity and labor costs are reported at 8:30 a.m. Thursday, the same time as jobless claims. December factory orders are reported at 10 a.m.

The European Central Bank and Bank of England are each scheduled to hold rate meetings ahead of the Wall Street open. Traders expect the ECB to hold rates steady this time, but the Bank of England is expected to cut to 1 percent. The dollar rose 1.5 percent against the euro Wednesday and 0.2 percent against the yen.

Wednesday's trading was choppy with stocks suffering an afternoon selloff. The Dow closed down 121 at 7956, and the S&P was off 6 at 832. Materials were the best performers, rising 1.5 percent, while telecom shares were the worst performers, falling 2.9 percent. Selling in Treasurys pushed the yield on the 10-year higher, to 2.914 percent, its highest level since Nov. 28.

Financials were down nearly a percent as investors considered comments from President Barack Obama and Treasury Secretary Tim Geithner imposing new curbs on executive pay at banks seeking government aid. Bank of America broke below $5 per sharefor the first time since 1990, on concerns it needs more government help. Separately, the Charlotte Observer reported on its website that CEO Ken Lewis sent a memo to employees saying the full board supports the company's business model and that January results were "encouraging."

"This is a week where we're driven more by what's happening in Washington than by what is happening on Wall Street," said Art Hogan of Jefferies. Traders have been watching for developments with the stimulus package before the Senate and the bank bailout plan, being reshaped by the Obama Administration. That plan is expected to be unveiled next week.

Hogan said there were some encouraging signs in the market in the past week, and he is one who believes stocks have successfully made a bottom in November. "You're seeing some selective buying in underperforming spaces and I think that's a good sign," he said.

He said money is coming out of some of the "safe" names. For instance, "money's been coming out of Wal-mart and going into riskier names in the consumer space," he said.

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A lot of market talk has centered around the idea that the market is positioning itself to retest its lows. Yet, there has been buying this week in some of the less defensive names.

"We're getting a lot of cross currents in this market. I would suspect this is going to be like a lot of the trading we'll see for a good portion of the first half ... kind of range bound., modestly above the lows of November and the highs not very far above where we've been recently," he said.

Other events to watch Thursday include the Senate Banking Committee hearing at 10 a.m. on the Troubled Asset Relief Program. Also, two Fed officials are speaking at separate events. Philadelphia Fed President Charles Plosser speaks at 8:30 a.m. to the Global Interdependence Center, and St. Louis Fed President James Bullard speaks on "monetary policy tools in an environment of low-interest rates" at 1 p.m.

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