Stocks rallied hard on positive earnings news Wednesday and will likely key off of Thursday's quarterly reports, but the pre-open weekly jobless claims will also be a major factor.
Stocks used the spring board of positive earnings news from Intel and others to vault higher in the best gain for the S&P 500 in a month. The Dow rose 1.5 percent to 12,453, its highest close since June 4, 2008. The S&P 500 rose 1.4 percent to 1,330, its best gain since March 21 and its highest close in two weeks.
Some other market moves were arguably more dramatic. The dollar was a major loser, and it was thumped as risk assets rallied across the board, and oil and other commodities sailed higher with the euro. WTI crude oil on the NYMEX rose nearly 3 percent to $111.45 per barrel after a sharp drop in crude and refined product inventories. Gold hit another record high above $1,500, and settled at $1,498.90 an ounce.
The dollar index was at 74.35, just above its July, 2008 closing level, as traders worldwide continued to react to Standard and Poor's revised negative outlook for the United States.
The greenback fell to 2011 and even some multi-year lows against major and emerging market currencies, including the euro, the Australian dollar, the Swiss franc, the Singapore dollar, Korean won, Canadian dollar, and Mexican peso. "It was a broad array of diversified currencies that hit new highs against the dollar today. In our view that's cyclical, and we wrote and thought there was increasing risks of instability and an overshoot in the second quarter, as the Fed pushed through with the final stages of this (quantitative easing) and the rest of the world is in a different mode with respect to interest rates," said Robert Sinche, head of global currency strategy for RBS.
After the bell earnings news from tech darling Apple , which beat estimates, drove its stock slightly higher on top of Thursday's already strong gains. General Electric, McDonald's, Verizon, DuPont, Morgan Stanley, Travelers, Nokia, Blackstone, Diamond Offshore, Honeywell, Newmont Mining, Southwest Air, United Continental, UnitedHealth, Xerox and Schlumberger are among the morning's reports. Advanced Micro, Biogen Idec, Capital One and International Game Technology report after the bell.
Weekly jobless claims are reported at 8:30 a.m. and are viewed as very important by traders because of the increase in claims last week. They are also looking to that number with an eye toward the Fed's two-day meeting next week, where there is some belief the Fed could signal the expected end to its quantitative easing program in June.
Traders have said there is concern a disappointing jobless claims number will influence the Fed's decision next week, since employment is one of its mandates. But Deutsche Bank chief U.S. economist Joseph LaVorgna said that is not likely. He expects to see claims at 390,000, down from last week's 412,000, which he believes may have risen because of auto plant shutdowns due to supply chain disruptions in Japan.
"The four week moving average is 396,000. During the March (jobs report) survey week it was 389,000. If we're at 390,000, that puts the four-week moving average at 395,000 and that's still consistent with (April) payrolls gains of several hundred thousand," he said.
"I think the market could ignore the claims being a little bit higher, especially if it is due to the supply chain shut downs. We can handle at least near term claims moving up a little bit more. I don't think it will have any impact on the Fed decision," he said.
LaVorgna expects the Fed to tweak the language in its statement slightly to show softer near-term growth but an overall improving economy and pickup in inflation. Fed Chairman Ben Bernanke will likely say in a briefing afterwards that quantitative easing will wind down in June, as expected. However, the Fed chairman is unlikely to discuss what the Fed plans to do about another program, under which it is purchasing about $15 to $20 million in Treasury securities a month, as its mortgage holdings roll off, said LaVorgna.
The market has been hyper focused on the Fed's meeting next Tuesday and Wednesday, since the approaching end of the $600 billion program to purchase Treasury securities is seen as a turning point, from which the Fed will begin to move to a more normal policy posture. In the meantime, Sinche sees the dollar surrendering more ground.
"I think it's the realization that this is the April meeting. They're not really going to do anything different, and the next meeting is June 22 so you've got a long stretch there if the Fed doesn't do anything to change expectations...seven weeks is a long time for the markets. Unless the data gets significantly better and the markets begin to respond to that, there's very little to fight the downward trend for the dollar," he said.
Besides claims, there is the Philadelphia Fed survey and leading economic indicators at 10 a.m. FHFA home price data is also released at 10 a.m. The bond market closes early - at 2 p.m. Thursday ahead of the Good Friday holiday.
As oil bubbles higher, energy stocks have gone with it but traders are increasingly worried about the potential impact on consumers.
"We're back in the mode of where the price of oil is correlative to the euro," said John Kilduff of Again Capital. "We get into these phases where it's highly correlative and we're in one now."
Kilduff said while there are much higher calls, he expects to see the current run in oil to top out between $115 and $120 per barrel.
A Long Weekend's Rumors
As traders wind down the week ahead of the three day weekend, rumors circulated on a number of fronts. For one, China is rumored to be ready to revalue its currency this weekend and Greece was rumored to be restructuring its debt. Greece, in a late day statement Thursday, said it was investigating the rumors of a weekend restructuring that spread through financial markets. "Such rumors are of course devoid of any substance and verge on the ridiculous," the Greek finance ministry said in a statement.
As for China, strategists doubted it would make a major change in currency policy. "Something's being discussed. I just don't think it's very drastic," said Brown Brothers Harriman currency strategist Win Thin. Thin said it is not very likely the Chinese government will do a one off revaluation. More likely, he said, is that it speeds up the pace of appreciation of the yuan.
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