Stocks - The Usual Suspects Affect Friday, But Turn In Store

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Includes: DIA, IEV, OIL, QQQ, SPY, USO, VXX
by: Markos Kaminis

Summary

Stock market futures were indicating an important decline for Friday at 6:00 AM ET.

Factors affecting futures included miss in a China economic data point, another downward revision to the oil demand outlook by the IEA and a question about Italy's government.

Given the bad vibe already existing on Wall Street, we're looking at a lower open, but U.S. economic data and good news about the aversion of government shutdown are important.

While stocks may open lower today and mark new lows in this speed bump of the month of December thus far, signs point toward bargain hunting and a year-end rally.

Stock market futures were indicating a sharply lower open at 6:00 AM ET. The early market issues were due to another poor China economic data point, a downwardly revised global energy demand forecast from the IEA, and the negative momentum that has the S&P 500 headed toward its worst week in two months. Never fear though, as the Congress appears to have averted a government shutdown. While we may have an unsettled morning (NYSEARCA:VXX), I expect the market to grow insensitive to each of the three negative factors currently plaguing it and head higher before mid-week next week, if not sooner.

The SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones (NYSE: DIA) and the PowerShares QQQ (NASDAQ: QQQ) were all indicating a much lower open at 6:00 AM ET. Factoring early this morning was data from China showing the industrial behemoth posted lower than expected industrial production. Apparently, the 7.2% gain in factory production fell short of expectations for 7.5%. This follows a lineup of data lately from China showing economic growth slowing, and the nation's central bank action to cut rates, which was equivalent to an admission of an issue.

Adding fuel to the fire, it looks like the Italians are following the chaotic path of the Greeks, as a general strike looms over Rome. The nation's elderly President announced he'll be leaving the office next year, which puts the fate of the Prime Minister he supported into question. There's some concern that a destructive change in government could ensue similar to what threatens Greece, where the establishment is about to be replaced by an EU-allergic party. European markets are down sharply on the latest threat, and so the iShares Europe (NYSE: IEV) and similar issues should have an unsettled start in U.S. trade.

The International Energy Agency (NASDAQ:IEA) went ahead and confirmed the market's worst fear when it published its Oil Market Report for December. It's the fourth time in five months the IEA is cutting its outlook for global oil demand. Global production fell by a greater amount in November than demand is expected to drop further in 2015, though the headlines will not pick that up today. Instead, all indications are that oil will mark new lows on Friday, and the iPath S&P GSCI Crude (NYSE: OIL) and United States Oil (NYSE: USO) as well.

These factors, along with recent momentum are quite scary to an already unsettled market, so the iPath S&P 500 VIX might be one of few risers in early trade. We look to start the day lower, and possibly mark a new low for this mini-correction or speed bump. However, let us remember that it is the world that takes the lead from U.S. markets; however, intermediate scares may temporarily impact us. Today's U.S. data slate has the 8:30 AM ET reporting of the Producer Price index (PPI); pray no signs of inflation magically appear here. Economists are looking for a 0.1% decrease of the headline figure on energy price decline and just a 0.1% increase for Core PPI, which excludes food and energy. Then at 10:00 AM ET, we'll get the Consumer Sentiment measure from the University of Michigan/Reuters. Estimates are for an improvement there to 89.5 from 88.8 at the close of November. Let's not forget also that just yesterday we learned about stellar retail sales in November, which was further confirmation that the U.S. economy is doing just fine.

Folks, while we may have a rough start on Friday, U.S. markets will also benefit from some good news domestically. It looks as if Congress has averted the possibility of a government shutdown again this year. While I'm not sure anybody believed this would go beyond a threat as we approach 2015 and given historical precedent, the top headline today will be Washington Keeps the Lights On! Stocks looking for reason to rally have certainly had good enough nails to hang their hat on in homegrown news. This is the latest reason, and it follows strong retail sales data reported on Thursday. We will head higher soon, if not by the close on Friday on bargain hunting, then sometime next week in my opinion. I cover the market regularly, and I think that even if you do not agree with my views on occasion, you might appreciate my column.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.