Friday Look Ahead: Market Focus Shifts Back to Middle East

Egyptian President Hosni Mubarak's vow to serve out his term has created a new level of uncertainty in an already tense situation.

Egyptian President Hosni Mubarak
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Egyptian President Hosni Mubarak

Market focus will shift back to events in Egypt Friday, after a confusing series of developments Thursday, when market reaction was muted to news about Mubarak.

Early news reports Thursday that Mubarak had decided to step down and that his vice president could take over drove stocks slightly higher, reversing morning losses. The Egyptian military also announced that it had stepped in to safeguard the country and that Mubarak would meet the demand of protesters.

However, Mubarak, in a late afternoon appearance, announced that he was staying in office until his term ends in September. He did concede some of his powers to his Vice President, Omar Suleiman. An angry throng of protesters continued to chant for Mubarak to leave, and Friday could be more tense as larger groups of protesters were expected to fill the streets in mass demonstrations.

The stock market finished mixed, with the Dow falling 10 to 12,229, ending an eight day winning streak. The S&P 500 gained nearly 1 point to 1321. Energy had the biggest reaction to Mubarak's statement. WTI crude rose nearly $1 after his announcement and was trading at just about $87.60 in late electronic trading.

"The security premium comes in and out of oil prices. This is now an event in the way it is evolving and now it's going to reinflate the security premium," said John Kilduff of Again Capital.

The dollar was higher Thursday, and gained about 1 percent against the euro, which was at 1.3594. It also gained about 1 percent against the yen in the New York session. It did not have much reaction to Mubarak's

"So far, nothing much in the market. I think it assumes it's a foregone conclusion.. It doesn't see this as a geopolitical risk just yet. I actually think this is just beginning and I think the market is underestimating the potential upheaval," said Boris Schlossberg of GFT Forex. He said if the situation turns violent, the dollar would rise against the euro and money would flow into the safe haven of the Swiss franc.

Patrick Boyle, managing director at FBR Capital Markets, said late Thursday afternoon that the stock market had also not reacted much to the unfolding events, but it might take its cue from what happens in overseas markets. "I think they're going to care in the morning," he said. Boyle said the strong momentum into U.S. stocks helped reverse the morning's selloff. Stocks are up more than 5 percent since the beginning of the year.

Treasury prices ended lower, and the yield on the 10-year edged higher to 3.71 percent. "If it gets ugly, there could be potential for some flight to quality," said John Briggs, Treasury strategist at RBS.

Investors will also be watching U.S. data, including international trade at 8:30am ET and consumer sentiment at 9:55am. The Obama Administration is expected to unveil its plans for government sponsored entities Fannie Mae and Freddie Mac.

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