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Here's what could make—or break—markets

Patti Domm
Here's what could make—or break—markets

Traders are watching to see if one bank makes a trend.

JPMorgan's better-than-expected earnings Wednesday boosted its shares, the financial sector and the entire stock market. So earnings reports from its competitors Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC) could be important to Thursday's trading. BlackRock (NYSE: BLK), PNC Financial, and First Republic Bank also report, as does Delta Air Lines (NYSE: DAL).

The S&P financial sector (CME:Chicago Mercantile Exchange: .SPSY) was up 2.25 percent, in its best day in more than a month. Financials have been running up ahead of earnings. JPMorgan profit fell nearly 7 percent and it earned $1.35 per share but that was better than the $1.26 expected by analysts.

"JPMorgan set the table. If they come through and we see JPMorgan was an anomaly rather than a signal then we could be back where we started. They could all be in the doghouse," said Mark Luschini, chief investment strategist at Janney Montgomery. Bank stocks are still down on the year, and the overall financial sector has fallen about 4 percent.

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The Dow (Dow Jones Global Indexes: .DJI) rose 1 percent to 17,908, and the S&P 500 (INDEX: .SPX) also climbed 1 percent to 2,082. Goldman Sachs (NYSE: GS) was responsible for 38 Dow points, as it moved higher with the financial group.

Oil took a day off from its rally, declining about 1 percent Wednesday in the futures market after U.S. crude inventories expanded more than expected. But production fell below 9 million barrels a day for the first time since late 2014. West Texas Intermediate (NYSE: WTI) futures settled at $41.76 per barrel.

The upcoming weekend oil producers' meeting in Doha, Qatar, could add to volatility as traders watch for headlines. The proposal to freeze production has added to oil's gains, which also have benefited from a weaker dollar and commodities rally.

Luschini is skeptical about a deal among crude producers, or one that will last. "These oil producers are notorious for breaking ranks," he said.

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Besides earnings, there are weekly jobless claims, and CPI consumer inflation data at 8:30 a.m. EDT. CPI is expected to rise 0.2 percent, and the same when food and energy are excluded.

The IMF is holding its spring meeting. Fed Governor Jerome Powell testifies before the Senate Banking subcommittee on securities at 10 a.m. EDT, and Atlanta Fed President Dennis Lockhart speaks in Chicago at 10 a.m. ET.

Luschini said stocks could be setting up for a move, if the improved economic news from China continues, oil does not crater and earnings news is supportive. China GDP data are Friday and are being widely watched, particularly after Wednesday's improvement in exports.

He said there are still interested sellers at these levels and the market is grinding along. "It could be a correction and maybe some of the conditions that get a little overbought get a chance to cool off, and investors get a reason to buy stocks," Luschini said. "Or conversely, we find out this is a head fake, which is what the market likes to do when it when it wants to lure in the most investors possible before it poisons them."

Read More US crude production falls below 9 million barrels per day

John Kosar, chief strategist at Asbury Research, said stock market indexes are at interesting levels, and the stock market's correlation to oil remains at a high 0.9.

"They're up against the old highs with all these indexes," he said, noting investors may have to choose whether it's an opportunity to sell or hold on for further gains.

"In the S&P, 2,082 and running up to 2,116 ... it's overhead resistance, and we're running up against it," he said. The resistance level for the Dow is around 18,000.

"I want to see steady and consistent trade over those levels," said Kosar.

Oil may of course be a factor, and he noted that crude prices typically peak in April. He said there is resistance in spot WTI between $43.40 and $44.50. "Spot crude has really been chopping around in this neighborhood since the third week of March. If we get through there, happy days," he said.

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