Wednesday Look Ahead: Bulls and Bears Fight It Out While Investors Watch OPEC

With many investors still in their bunkers, bulls are emerging to duke it out with bears for control of a stock market that still feels a bit bumpy.

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Stocks erased the day's gains going into Tuesday's close, as Fed Chairman Ben Bernanke began to speak to a group of bankers about the economy's sluggish growth, and the need for accommodative policies. But in his speech, which began just before the market close, he stopped short of offering any new solutions that would support growth, or provide new juice for the stock market. He also made it clear that he expects growth to continue, even if it is uneven.

There is no early data Wednesday but the Fed releases its beige book on the economy at 2 p.m., and the Treasury auctions $21 billion in reopened 10-year notes at 1 p.m.

An important event of the day will be the outcome of what could be a contentious OPEC meeting in Vienna, where OPEC is expected to announce the first change in production quotas since October, 2008. High oil prices have been blamed for a good part of the economy's sluggishness as consumers struggle with gasoline prices that peaked above $4 a gallon in many parts of the country last month.

The Dow finished Tuesday 19 points lower at 12,070, about 100 points below the day's highs. The index was in positive territory for 98 percent of the day, according to Dow Jones. The S&P lost 1 point to 1284.

The stock market's current level is a battleground of sorts, with some analysts convinced stocks are near the lows of the current sell off and others expecting it to bump along and go lower into the summer.

Credit Suisse U.S. equity strategist Doug Cliggott told a group of reporters Tuesday he does not expect the market to be higher than current levels at the end of the year. His S&P 500 target is 1,275. "Our guess is we'll see a number this summer that starts with an 11," he said.

John O'Donoghue, head of equities at Cowen, is in the other camp. "I still get the feeling we're at the low end of the range, and we're going to muddle through," he said.

Technicians also disagree. WJB Capital's John Roque, quoted here last night, believes 1,250 is the next target for the S&P, but Oppenheimer's Carter Worth says he's a buyer and that the market should bounce in the near future. He points to the fact that the S&P 500 and other indexes have found support around their 150-day moving averages.

The dollar finished Tuesday lower, in part on comments form a senior Chinese currency official, warning that China must be alert to the risk of holding too many dollars as Washington pursues loose monetary and fiscal policies. The comment was removed from the website of a Beijing think tank website, but it still had an impact. The dollar slid even further against the euro as Bernanke spoke.

J.P. Morgan economist Michael Feroli pointed out that markets should not have been surprised that Bernanke did not discuss QE3, or another round of quantitative easing, or other policy measures to support growth. The Fed's current quantitative easing program to buy $600 billion in Treasury securities expires at the end of June, and as the economy began to show signs of slowing in recent weeks, traders started speculating another round could be up for discussion.

"To the contrary, after listing the challenges facing the economy, Bernanke concluded: "monetary policy cannot be a panacea." Not exactly Rooseveltian resolve (not that we can blame him given the political situation). But the perception that the Fed could be out of bullets only heightens the importance of the next round of growth data making a turn for the better," Feroli wrote in a note.

Oil Drill

Tradition Energy's Addison Armstrong, in Vienna for OPEC, said he expects OPEC to expand its quotas, in part to meet the level of increased production already going on. "I think they'll probably raise it at least 1.5 million barrels, just to legitimize current overproductions," he said, noting that any members that can produce more have been. "The ones who aren't are Venezuela and Nigeria. Even the Iranians are overproducing" he said.

CNBC's Melissa Francis reported Tuesday that OPEC will raise quotas, but the amount was still under discussion. The current quota is 24.845 million barrels a day.

Iran holds the rotating presidency of OPEC currently. Iran appointed a new oil minister Mohammad Aliabadi, head of the Iranian National Olympic Committee who has no apparent oil experience.

"We can never tell because it's behind closed doors, but I would suspect the Saudis are the strong hand right now. It's very surprising to me that Iran has sent such a weak delegation, considering they have been so publicly opposed to raising the quotas," said Armstrong.

He notes that Saudi Arabia has repeatedly said they are comfortable with oil at $70 to $80 per barrel. "The Iranians and Venezuelans don't want to raise the quotas at all because they want prices to remain as high as possible, and the Saudis and Kuwaitis do have spare capacity and are more concerned about the longer term impact. They don't want to raise prices because they fear that high prices have already begun to create demand destruction," he said.

NYMEX crude finished at $99.09 a barrel, up just $0.08, but Brent crude, rose sharply, gaining 2 percent to $116.78 a barrel.

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