Thursday Look Ahead: JP Morgan, Google Earnings May Inspire

Earnings releases from J.P. Morganand Googlebook end the trading day Thursday and could provide some more juice to the market's earnings rally.

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Stocks Wednesday finished on a mixed note, after declining in the mid afternoon on a downgraded economic forecast from the Fed. Yet, the Dow managed to close slightly higher, up 3 at 10,366, its seventh daily gain. The S&P 500was barely changed, off 0.17 at 1095.17.

"I think what you're seeing is a real tug of war here. The bulls don't want to give up, and the shorts don't want to press because earnings season has been particularly good, especially Intel," said Art Cashin, director of floor operations at UBS.

"We've seen CSX, which gave you a look at industrial America, and so didAlcoa, to a degree. Then we sawIntel, which told you about tech and now we're getting a look at the financials," said Cashin. Citigroup and Bank of Americafollow J.P. Morgan, with earnings reports Friday.

J.P. Morgan releases earnings before Thursday's bell and is expected to earn $0.70 per share, compared to last year's $0.28 per share. Barclays analysts said asset quality for big banks should improve in second quarter reports, and they will be highlighted by lower non-performing assets, net charge-offs and loan loss provisions.

Barclays expects weaker bank profits because of lower capital markets revenue, and also recommends investors be cautious on large banks because of financial regulatory reform, and sovereign debt worries, among other issues. Financial regulatory reform, in fact, could come before the Senate for a vote Thursday, after it takes a cloture vote Thursday morning.

Google reports profits after Thursday's closing bell, following a super strong report from tech heavy weight Intel earlier in the week.

What to Watch

Big for Thursday's markets will also be China's second quarter GDPgrowth, which came in at a weaker than expected 10.3 percent, and weekly jobless claims, reported at 8:30 a.m. Other U.S. data includes PPI producer inflation data, and the Empire State survey, both at 8:30 a.m. Industrial production is reported at 9:15 a.m. and the Philadelphia Fed survey is at 10 a.m.

"Anything less than 450,000 (jobless claims) will be a psychological boost for the market. I think we have to get down there and hold those levels," said Jeffrey Kleintop, chief market strategist at LPL Financial. Economists expect claims of 445,000 after last week's 454,000.

High unemployment is one the biggest frustrations of the economic recovery. The Fed, in fact, in cutting its GDP forecast, also provided a worse forecast for unemployment. It sees the unemployment rate bottoming out this year at 9.2 percent, up from its earlier forecast of 9.1 percent. Unemployment is currently 9.5 percent. Growth expectations for this year were trimmed to 3 to 3.5 percent for this year, from 3.2 percent to 3.7 percent previously projected.

The Fed also cautioned that it could take years for the economy to return to full health, and that it would consider further policy stimulus, if needed.

Treasury pricesrose Wednesday, as interest rates fell, on the Fed's weakened forecasts. The yield on the 10-year fell to 3.05 percent from 3.13 percent the day earlier. The 30-year's yield fell to 4.03 percent, after the auction of $13 billion in bonds.

"It was a combination of the Fed's minutes and a pretty stellar auction," said Nomura's Treasury strategist George Goncalves. "The combination of those two is what got the bond market in good spirits."

"The Fed minutes, on balance, were hinting towards the ship being turned at the Fed into a place where rates will stay lower for longer. I think the bond market is a voting machine and right now it's voting with its feet. It's telling you some of the policies that are being put in place are not pro-growth and not inflation fighting," he said.

The markets Wednesday also absorbed the disappointing June retail sales report, which showed sales declining 0.5 percent, compared to the 0.2 percent expected.

Whither Stocks

Kleintop said he expects the stock market to see moreearnings season gains. "The last three of four earnings seasons were different. They bought the rumor and sold the news. This time, the market sold the rumor of this earnings season, and now it's kind of the opposite. The back of earnings season may not be as much of a catalyst as we saw last week and this week," he said.

Kleintop early last week declared the stock market oversold and said he was a buyer of stocks. He now sees just a little bit more room for the market to run before it starts sliding backwards.

"I think that there's still a little bit more to this rebound. Our view is we're still going to see mid-single digit gains for the stock market. We've got a little bit to go, then we'll see another pull back, then we'll see another rebound," said Kleintop. His year end target is 1175 to 1200.

Getting Technical

MacNeil Curry, Barclays chief North American technical strategist, said the stock market is acting better than expected. The number of new highs, percentage of up volume and the advancing shares versus decliners supports the idea that the correction may be shallower than originally expected.

"It might be more of a range trade than we anticipated. The various signals we had developed on a quarterly basis ...all of those are larger than a week and a half. So it doesn't diminish the fact that we are correcting the larger bull move that we had from the March, 2009 lows. Does it suggest we'll see more of a range than a deeper correction? That's what we're working through right now," he said.

Curry said it may be that the S&P 500 stays more in a range of 1000 to 1250, rather than dipping to a steeper correction of as much as 25 percent, which would be 950.

"We're not switching our view yet," he said. But the advances and volume, "suggest it has some legs behind it."

What Else to Watch

San Francisco Fed President Janet Yellen's nomination to replace Fed Vice Chairman Donald Kohn will be the topic of a Senate Banking committee hearing at 9 a.m.

Fed Gov. Elizabeth Duke speaks at a hearing on the Home Mortgage Disclosure Act at 8:30 a.m. in Atlanta, and Richmond Fed President Jeffery Lacker, speaks at 7:15 p.m. on the economic outlook in Norfolk, Va.

Questions? Comments? Email us at marketinsider@cnbc.com