MARKET SNAP: At 6:25 a.m. ET, S&P 500 futures down 0.47%. Treasury yields slightly lower at 2.75%. Nymex down 0.67% at $99.71. Gold down 0.33% at $1290.6/oz. In Europe, FTSE 100 down 0.71%, DAX down 0.35% and CAC 40 down 0.53%. In Asia, Nikkei 225 down 1.79% and Hang Seng down 0.54%.
WATCH FOR: Weekly Jobless Claims (8:30 a.m. Eastern Time): seen 330K; previously 331K. January Retail Sales (8:30): seen -0.1%; previously +0.2%. December Business Inventories (10:00): seen +0.4%; previously +0.4%. Agilent Tech, AIG, Apache, Avon Products, Burger King, Calpine, Cliffs Natural Resources, Goodyear Tire, Kraft Foods, Molson Coors, Nielsen, Orbitz, Pepsi, Starwood Hotels and Weight Watchers are among companies scheduled to report quarterly results.
THE BREAKFAST BRIEFING
The worst of the recent stock-market pullback appears to be over, but that doesn’t guarantee smooth sailing ahead for investors.
Traders said the scope of the gains earlier this week reflected short-term positioning following the recent drop as opposed to outright bullish bets. As last month’s bout of volatility in emerging-markets stocks and currencies has abated, investors have taken a less bearish stance toward U.S. stocks, but remain reluctant to get too optimistic about the market at current levels.
Technical factors appear to be supporting the market, at least for now, although a glance across Europe and Asia Thursday show markets taking a pause from the rally. The S&P 500 jumped back above its 50-day moving average this week, a chart level used by technicians to track the market’s short-term trend. As Bespoke Investment Group pointed out, more than half of the S&P 500’s constituents are trading back above their individual 50-day moving averages.
“While the pullback we experienced won’t officially be over until the market makes a new high, the fact that more stocks are now above their 50-days than not is a good sign,” the firm says.
The S&P 500 is off 1.6% so far this year, after slumping 5.8% from mid-January through early February. Soothing comments from Federal Reserve Chairwoman Janet Yellen sparked Tuesday’s rally, the biggest one-day jump of the year.
Still, the market is far from giving an all-clear signal.
“The S&P 500 has gone from deeply oversold last Wednesday to the most overbought of 2014,” said Peter Boockvar, managing director at the Lindsey Group, an economic advisory firm. “Where we go from here therefore will be most telling as a continued rally will then assume a potential breakout, while a selloff would confirm a failed rally below the highs.”
Even one of the market’s biggest bulls continues to worry about what lies ahead for stocks in 2014.
Jim Paulsen of Wells Capital Management is concerned that the economy could actually grow too fast, sparking a renewed spat of inflation concerns that could limit stock gains. Mr. Paulsen forecasts GDP growth of about 3.5% this year, yet also predicts the S&P 500 could first approach 2000 (it closed Wednesday at 1819.26) before tumbling in the second half of the year and finishing close to break even.
The call, which Mr. Paulsen laid out last month and reiterated on Wednesday, is surprising given his bullish reputation. It also underscores the sense of caution in the investing community even as the market has recovered much of this year’s pullback.
“The first overheated fears of this recovery may ultimately result in a correction which perhaps returns the S&P 500 back to levels close to where it started 2014,” Mr. Paulsen said. “That is, although this year might prove the best economic performance of the recovery, it may also produce a volatile and frustratingly flat stock market.”
Morning MoneyBeat Daily Factoid: On this day in 1997, the Dow Jones Industrial Average pierced 7000 for the first time ever. The blue-chip average finished that day at 7022.44.
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