(By Rich Bieglmeier) It was a very interesting day on Wall Street. Stocks started off on the wrong foot, only to recover and end in positive territory for the NASDAQ and S&P 500. The uptick may have been the result of the president of the Federal Reserve Bank of Minneapolis, Narayana Kocherlakota's comments that QE3 may be coming.
He says additional easing might be necessary to offset the nation's looming tax bill as the calendar flips to 2013. Sadly, the Kocherlakota says the current job situation might be as good as it gets due to structural damage.
As nice as the u-turn was, the indexes weren't able to break yesterday's highs and could be building resistance at 2850 for the NASDAQ, 1320 for the S&P, and 12,500 for the Dow. Despite the zigs and zags, the indexes closed near these levels for three consecutive days.
With the indexes closing in the top 25% of the day's range, tomorrow's close becomes very important. If the trio manages to close in the bottom 25% of Thursday's range, it could be a sign that the downtrend continues on Friday.
Jobless Claims and Durable Goods Orders will have the opportunity to help the markets avoid being anywhere near lows Thursday if results come in ahead of expectations.
Wall Street looks for 371,000 initial applications, which is slightly lower than the four week average of 375,000. The range is 361,000 to 378,000. We believe results will be in line with expectations, plus or minus a few thousand. Unless the number comes in outside the range on either side, iStock doesn't expect the market to get too excited about Jobless Claims this week.
Instead, Durable Goods Orders are likely to dominate pre-market futures activity and the opening bell's direction. Economists believe there will be a 0.7 % jump in goods that last more than three years.
In order for Orders to top expectations, they will have to overcome two week regional manufacturing reports, Richmond and Philadelphia, and build tail winds from tepid Chicago and robust Empire State manufacturing gains.
iStock believes a slight miss is in the cards for Durable Goods.
With 95% of the first quarter earnings ballots counted, as reported earnings are up more than 8% year-over-year. That's a solid quarter. Meanwhile, revenues for the companies announcing results are up 6.62%.
As iStock mentioned in a previous market brief, investors need to keep an eye on the dollar. If the dollar continues to move higher versus the Euro, then second quarter profits are going to take a hit. Nearly 60% of the S&P's revenue comes from international sales, and a strong greenback will negatively affect the bottom line for global companies.
If earnings fall from currency valuations, they could be double whammied by a slowing global economy crimping actual profits too. The combo could be poisonous for US equity markets until Q2 numbers start to roll.
iStock will be monitoring the situation closely and report back to you what learn along the way.