US stocks sold off sharply in the pre-market following European weakness, and weakened throughout the day. US Treasuries rallied steadily with the 10-year yield declining by five basis points to 1.96%. Crude oil also came under pressure and fell $1.60 to $96.17 at the end of floor trading.
In economic news, December US factory orders rose at a monthly rate of 1.8%. This was less than the estimate of 2.3%, but the gain was in-line with the market's expectations as ISM manufacturing and Chicago PMI figures have shown similar gains in January.
The heavy overseas selling was tied to a number of different variables. The upcoming Italian election has many investors and citizens on edge as some of the more extreme elements of Italian politics have taken the lead, namely, ousted Prime Minister Berlusconi. Spanish Prime Minister Rajoy is also under the microscope as allegations of illegal cash payments from unknown sources surface. The Spanish IBEX has now fallen nearly 10% over the past six days while the Italian FTSE MIB index has dropped by 7.75% over the same time frame.
In global economic data, China's services industries PMI rose slightly to 56.2 in January from 56.1 in December. The index continues to show small gains, but the magnitude of its monthly gains have slowed.
On the home front, it was reported that Dell (NASDAQ:DELL) is finalizing the price of its LBO with a valuation around $13.50-$13.75 per share. The stock traded lower today, falling 2.6% to close at $13.27
Tomorrow's Financial Outlook
The second phase of the ISM's monthly reports, the non-manufacturing composite, is due out tomorrow morning. Manufacturing data has continued to accelerate in January to make up for the supply shortfall from the prior two months, but the services composite is expected to decline to 55 from 55.7 in December. It will be the sole economic report tomorrow.
Globally, there will be more data released. For Chinese data, HSBC will release its own flash services PMI from January. Also in Asia, the Reserve Bank of Australia will make its monthly rate decision. Economists estimate that the central bank will keep its benchmark cash rate unchanged at 3.00%. In Europe, the eurozone will release retail sales from December and the UK will release its services PMI.
In US earnings, NYSE Euronext
(NYSE:NYX), Sirius XM
(NASDAQ:SIRI), HCA Holdings
(NYSE:K), Chipotle Mexican Grill
(NYSE:CMG), Walt Disney
(NYSE:AFL), Panera Bread
(NASDAQ:SFLY), CME Group
(NASDAQ:EXPE), and Zynga
(NASDAQ:ZNGA) will report.
No positions in stocks mentioned.
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