After a two-day, 2% decline, the S&P 500 recovered after progressive reforms from Spain were announced, potentially opening the door for a precautionary aid package from the EU. This caused a nearly 1% spike intraday. This strength continued throughout the day, with the S&P 500 finishing the day up over 1%. Gold futures rose strongly, up 1.5% to $1777.60 on the back of increased asset purchases and reflation.
The economic data in the morning was some of the worst on record. Durable goods new orders fell 13.2% month-to-month, which was one of the worst recordings in history. The details of the report showed that capital goods expenditures had slowed to a historic low. Also in the morning, the third estimate of second-quarter GDP showed growth in the US slowing to 1.3% from 1.7%. Because this is the third estimate, it is the least likely time for a radical change in the reading. However, the market shrugged off these horrible data points, potentially showing that worse growth figures would make the case for increased asset purchases from the Federal Reserve. The Labor Department showed that weekly jobless claims declined from 375,000 to 359,000.
As a result of of new asset purchases from the Federal Reserve, 30-year fixed-rate mortgages fell to a new record low at 3.40%, down from 3.49% last week, according to Freddie Mac.
After the close, Research In Motion
(RIMM) reported a loss of $0.27 in earnings, beating estimates of -$0.46 handily. Revenues also beat by a wide margin at $2.87 billion compared to estimates of $2.5 billion. The stock rose over 12% after-hours.
(NKE) also beat earnings at $1.23 per share, $0.09 better than estimates. Revenues also beat at $6.7 billion vs $6.42 billion estimates. However, due to slowdowns in global sales, the stock fell in extended trading.
Tomorrow's Financial Outlook
Additional growth and spending figures will be reported in the morning. The US will report personal income, personal spending, PCE deflator, and PCE core in the morning. The PCE reports are the figures that the Federal Reserve uses to gauge inflation, so a drop could signal the Fed's willingness to increase asset purchases without causing inflation to spin out of control. The University of Michigan and Reuters will report the final estimate for the monthly consumer confidence statement. Two weeks ago, the index unexpectedly jumped from 74.3 to 79.2.
In China, HSBC will report the final estimate for Chinese manufacturing PMI. Earlier this month, the index showed manufacturing growth remained in recessionary territory.
In the morning, Finish Line (FINL) and Walgreens (WAG) will report earnings.
No positions in stocks mentioned.
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