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Jobless Claims, Wal-Mart Earnings to Sway Sentiment Thursday

Weekly jobless claims are a big item for markets Thursday, but the earnings of retailers could ring up some early signals about the holiday season.

Traders work on the floor of the New York Stock Exchange.
AP
Traders work on the floor of the New York Stock Exchange.

Wal-Mart, the largest U.S. retailer, reports third quarter earnings ahead of the opening bell, as does department store chain Kohl's . High-end department store chain Nordstrom reports after the bell, along with Disney.

Unemployment claims are reported at 8:30 a.m. and are expected to come in at 510,000, but a number below 500,000 would provide a psychological boost for markets. There is also an auction of $16 billion in 30-year bonds at 1 p.m.

Wednesday's market was quiet and traded in a narrow range. The Dow finished higher at 10,291, an increase of 44 points, and the S&P 500 was up 5 at 1098. The dollar firmed, and the bond market was closed for the Veterans Day holiday.

Oil was slightly higher at $79.28 per barrel, and gold continued to set records, rising 1.1 percent to $1,114 per troy ounce.

Ka Ching?

Retail earnings are expected to be show an increase this quarter, for the first time in two years, thanks to cost cutting and easy comparisons. Macy's reported earnings Wednesday, and its stock fell even after the company provided a cautiously higher outlook for the holidays. The forecast, however, fell short of Wall Street expectations.

Wal-Mart may fare better. "I think they'll have some gross margin gains and SG and A that allows them to beat consensus," said Daniel Binder, retail analyst with Jefferies. Wal-mart is expected to earn $0.81 per share on revenues of $98.7 billion.

"I think you're going to hear them talk about softer sales relative to plan," said Binder. He said Wal-mart will see deflation in its sales this year, from declines in food prices and TVs. Last year, it saw an inflationary lift of about three points.

Overall, retailers could report sales gains of 1 to 2 percent for the holiday season, Binder said. "I wouldn't be surprised to see it in the low single digits,. It's better than being down. If you look at the '90 to '91 period, you had back-to-back soft holidays even as the consumer bounced back," Binder said.

Binder said he does see the U.S. consumer beginning to bounce back as the holidays approach. However, those that are shopping will not see the types of steep discounts retailers offered last year, as they tried to clear piles of unwanted inventory.

"A lot of these inventory decisions for holiday have already been made and are pretty conservative. I think you're going to see pretty rational pricing. Some of the best deals for consumers were last year," he said.

Dollar Daze

China's sharply higher industrial production helped lift risk assets Wednesday. The dollar initially touched a 15-year low before recovering. Sterling fell after a Bank of England official said the weak currency is an aid to British exporters.

"The decline in sterling generated this broader short dollar covering," said David Gilmore, market strategist with Foreign Exchange Analytics. Gilmore said the trend for the dollar remains lower.

Treasury Secretary Timothy Geithner, visiting Tokyo Wednesday, said he deeply believes a strong dollar is "very important" for the United States. Yet, investors did not seem to consider that comment to be any stronger than other remarks made by U.S. officials. Geithner remains in Asia for APEC, and traders are watching for more comments from officials around that event.

"Things that are on the front burner are the idea that the carry trade has official sanction," said Gilmore. "...Geithner's comments were nothing new in terms of expressing concern about the dollar and the Fed is pledging to help keep rates low. That's a pretty powerful story."

What Else to Watch

President Obama heads to Asia for visits with Asian leaders and the APEC meeting.

Winterizing Your Portfolio - A CNBC Special Report
Winterizing Your Portfolio - A CNBC Special Report

CNBC's Becky Quick hosts a town hall at Columbia University with Warren Buffett and Bill Gates, which will air on CNBC at 9 p.m. Thursday.

Investors are keeping an eye out for merger activity these days, and another deal popped after Wednesday's closing bell. Hewlett Packard said it would buy 3Com for $2.7 billion or $7.90 per share.

Cisco holds its annual meeting in Santa Clara, and McDonaldsholds its analyst day, starting at 11 a.m. Apple will discuss its retail strategy at its new New York store at 11 a.m.

Questions? Comments? marketinsider@cnbc.com