After emerging market equities took a blow in Thursday's trading session and crude oil enjoyed a bounce, Washington Crossing Advisors portfolio manager Chad Morganlander breaks down three key catalysts for the week's final trading day.
1. The emerging market trade
One popular emerging markets exchange-traded fund, the EEM, fell nearly 2 percent on Thursday. Brazilian equities, which logged their worst day in nine years on the back of a striking political scandal in the country, dragged down the fund. Morganlander is watching emerging market equities in the wake of Thursday's action, with a particular eye to China, which makes up the bulk of the fund.
In China, "I do believe that there's going to be a deceleration of credit growth, and that also is going to affect the markets," he said Thursday on CNBC's "Trading Nation."
2. Fed speeches on tap
Two Federal Reserve regional bank presidents are set to deliver speeches on Friday, and Morganlander is watching both for signals as to how the central bank will begin reducing its balance sheet.
Federal Reserve Bank of St. Louis president James Bullard is scheduled to speak in the morning at the Association for Corporate Growth St. Louis Chapter on U.S. economy and monetary policy; Federal Reserve Bank of San Francisco president John Williams is scheduled to speak in the afternoon to high school students in South San Francisco.
Neither currently has a vote on the Federal Open Markets Committee, but their words could provide clues to the Fed's next move.
"We believe that any strong language there could perhaps give a little bit of a signal to the market and that could affect interest rates as well as equity prices," Morganlander said.
The market is currently pricing in a 74 percent chance that the Fed will hike rates at its June meeting, according to CME Group's FedWatch tool.
3. Crude oil
Crude oil has rallied over the last week, and Morganlander believes that Friday is going to be a "critical" day of trading for the commodity.
Russia and Saudi Arabia last weekend reached an agreement to extend OPEC output cuts through March 2018, which sent crude oil prices higher. Concern over increasing U.S. shale production, however, has capped the gains. Morganlander is bearish at these levels.
"We think that potentially oil can roll over again, and you can start to see selling pressure going into not only Friday but next week and the following week. We'd stay clear of oil," he said Thursday.
OPEC members are set to convene next week.
