Thursday Look Ahead: Consumer, Jobless Claims are Twin Tests for Thursday Markets

The American consumer is a major theme Thursday, as chain stores report their monthly sales.

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Dozens of companies also report earnings, but the key headline for markets comes at 8:30 a.m., when weekly jobless claims are reported. Traders are watching that number with an eye toward Friday's July employment report, the most important data point in weeks.

Stocks made small gains Wednesday, with the Dow up 44 to 10,680, and the S&P 500up 6 to 1127. Treasury pricesfell, lifting yields, as better than expected economic reports fed the gains in stocks. The yield on the 5-year was at 1.62 percent, edging away from the record lows it set this week. The 10-year was yielding 2.96 percent.

"Everybody is kind of passing off and waiting for Friday," said Art Cashin, director of floor operations at UBS. On Friday, the government jobs report is expected to show the loss of about 65,000 non farm payrolls in July. Economists expect about 50,000 to 100,000 private sector jobs to have been created during the month, but the loss of temporary government census workers will keep the total number negative.

Traders Wednesday pointed to a slightly better-than-expected ADP report, which showed a gain of 42,000 private payrolls. The ISM non-manufacturing data also was better than expected, and the employment component of the survey showed an improvement in hiring.

Cashin said stock traders are digging deeper than they normally do into economic reports, making cases based on the underlying numbers. "Everybody makes an excuse for what they believe by drilling down into the numbers," he said.

Chain stores report sales for July mostly ahead of the opening bell, and they should give some clues about the back-to-school shopping season. Thomson Reuters expects its retail index to show a gain of 3.1 percent, compared to a decline of 5.1 percent last year. The best performing groups are expected to be department stores, up 4.6 percent and discount, up 3.9 percent.

The dollarclawed back about a half a percent against the euro Wednesday and a bit more against the yen. The euro was at $1.3164 per dollar. The yen was at 86.3334.

Michael Moran, senior currency strategist at Standard Chartered, said the trend is still lower for the dollar.

"In the second half, I think we certainly see the dollar weaker, and I think it's very much a yield-driven story ,"he said on "Closing Bell." "As long as we see U.S. Treasury yields as low as they are, and we don't see any significant upside given the sluggishness of the U.S. economy, then I think that's going to be a very negative driver for the dollar, especially against the high yielding currencies -- whether its commodity currencies or whether its emerging market currencies. I think that's going to be where the bigger gains are going to be seen against the dollar in the second half of the year."

In a telephone interview later, Moran said he thinks the dollar will stay in its current trend for awhile. "I think Q3 and Q4 may resemble Q1, which was a benign environment for risk, and investors are forced out along the yield curve and outside the U.S.," he said.

Moran also thinks the break out this year will come in emerging markets. He pointed to the double digit gains in copper and oil since June. "There's something going on here, and it's not just a 'risk on' signal," he said. He said there are also signs of a bigger commodity inflation trade coming. "We don't talk about it in the U.S. because we don't see it,' he said.

Oil, which has been pushing above $80 in recent sessions, slipped by $0.08 Wednesday, as the dollar gained.

What Else to Watch

Among the companies reporting earnings Thursday are Kraft andUnilever, two consumer-products giants. Consumer behemothProcter and Gamblehad an earnings miss that knocked its stock lower earlier in the week. Also reporting are Viacom, Hyatt Hotels, Rio Tinto, Time Warner, Watson Pharmaceutical, Cigna, Churchand DwightandFoster Wheeler. Kraft's report and Activision Blizzardare after the closing bell.

President Obama visits a Ford plant in Chicago. He will also speak to CNBC's Phil Lebeau in an interview that that will air on "Power Lunch" at 1 p.m.

Both the European Central Bank and Bank of England hold rate meetings, ahead of the U.S. market open, and no action is expected. ECB President Jean-Claude Trichet is expected to make comments after the meeting.

The European Union and IMF are also due to disclose the latest assessment of the Greek economy.

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