Retail sales and consumer sentiment could call the shots for markets early Friday.
Markets Thursday found positive news to feed a triple digit gain in the Dow, as stocks, commodities and the euro all rose in a rally that started with strong economic news from Asia. Treasurys lost ground, and the dollar was weaker on the day.
"I think over the last couple of weeks a lot of people got short. A lot of people bought puts and a lot of people made money when the market was going down. It was a scramble for the exits, and I think that was a bigger determinant for what stocks did today than any news items," said Steve Massocca, managing director at Wedbush Securities.
The energy sector was the big winner, gaining 5 percent in a rebound from Wednesday's sell off. BP, clobbered Wednesday by liability concerns, jumped more than 12 percent. Other companies involved in the Gulf of Mexico oil spill -- Anadarko, Transoceanand Halliburton - also reversed Wednesday's losses.
Massocca said he'd stay away from those stocks but focus instead on companies that drill on land. "My guess is this is a political story that's got legs. Obama is going to go after these guys, making BP and RIG (Transocean) into the bad guys. Passing some legislation that hurts these companies is all going to be popular. They'd be great to trade with but I wouldn't close my eyes and own any of them," said Masscca.
He said he doesn't think the selling is over but the market may continue to bounce on short covering near term. "There's probably a little more negativity to unwind here. July looms and a lot of money needs to get raised in Europe in July," he said.
TheDow rose 273, or 2.8 percent to 10,172, while the S&P 500 jumped 31 or 59 points to 1086. The 10-year yield rose to 3.321 percent, and afternoon auction of $13 billion in 30-year bonds went smoothly. (Track U.S. pre-market futures here)
Ian Lyngen, senior Treasury strategist at CRT Capital, said Treasurys will focus Friday on retail sales and consumer sentiment, released at 8:30 a.m. and 9:55 a.m., respectively. But it is the stock market and risk assets that bonds have been watching. Retail sales are expected to rise 0.2 percent, or 0.1 percent ex-autos.
"The market has been going back and forth with effectively this risk on, risk off mentality. We've been following stocks loosely and that is more of a reflection of what's going on in the rest of the world..it's a function of what's happening in Europe," Lyngen said.
Lyngen also said the market is also trading on technicals right now. "We are in more of a range defining mode than we are trending off of fundamentals," he said. The low end of the range in the 10-year yield was struck on May 25 when the yield fell to 3.06 percent.
Paul LaRosa, chief market technician at Maxim Group, said Thursday that he didn't trust the rally. "I'm not a big believer. I don't think it can be trusted at this point. Even on a day when the market is up big on the day, there's only about a dozen new highs on the Nasdaq and about 66 new lows. In a bull market, that's not happening," he said.
LaRosa said he's watching for 10,300 on the Dow and 1102 on the S&P. "Those are initial resistance zones. If we got above that we should go a little higher," he said.
"I think for the time being, rallies shouldn't be trusted, and I think people should be careful. If people are nervous about the market cracking, they should take some money off the table," he said.
He said for now, the charts look poor. He said he's watching key levels for signs of trouble. They are 9,810 on the Dow; 1041 on the S&P 500; 2139 on the Nasdaq,and 607 on the Russell 2000.
"If they give way on a closing basis, that will give way to big acceleration on the downside," he said.
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