The market's action today was dominated by political strife in Washington. The other two main themes were the revision lower of China's September manufacturing PMI and political problems in the Italian government. Current Italian Prime Minister Enrico Letta's cabinet was put in jeopardy when ministers allied with ousted ex-PM Silvio Berlusconi resigned from his cabinet. This put Letta's coalition in jeopardy and may force him to seek a vote of confidence within the Italian Parliament. If the vote does not pass, the worst case scenario is that the Parliament would be dissolved and new elections would be held.
Last Sunday, the first estimate of September Chinese manufacturing PMI saw growth to 51.2 from 50.1 in the month prior. On the recent Sunday that estimate was revised down to 50.2, indicating the growth was not as robust as had been reported earlier.
Over the weekend, the House voted to send the spending bill back to the Senate with the removal of the provisions that funded Obamacare. This bill was voted down by the Senate in their scheduled session early this afternoon.
(INDEXSP:.INX) futures gapped down 14.5 points last night when Globex trading opened, remaining near that level until the market opened. Once the market opened, equities rose to trade down 0.55%, reaching a peak of -0.3% when news leaked that Senate Republicans were discussing a one-week stopgap spending bill. This would avert a government shutdown while Congress worked out its long-term differences. These discussions are still ongoing at the time of this writing.
Health care and utility sector stocks were the best performers. Investor thinking was that if Obamacare was implemented, then health care stocks stood to benefit further. Consumer staples stocks were the worst performers alongside negative performance from grain commodities.
Tomorrow's Financial Outlook
The political drama should continue to dominate tomorrow's news flow. If a shutdown is averted, the next order of business will be the debt ceiling talks, which will need to be completed over the next two weeks. If a spending bill is not reached, essential government functions will shutter.
ISM will release its September survey of national manufacturing conditions tomorrow morning. Economists estimate that the survey will decline to 55.1 from 55.7, still signifying robust economic expansion. The August construction spending figures are estimated to decline to a 0.4% month-to-month rate from 0.6% in July. Lastly, domestic auto manufacturers will release their monthly auto sales throughout the day, culminating in the month's totals at some point in the late afternoon.
In global market-moving news, Germany will release employment data from September alongside the overall eurozone's unemployment rate for August. In the UK, Markit will release the preliminary manufacturing PMI for September. In China, the government's official manufacturing PMI gauge will be released overnight. Lastly, the Reserve Bank of Australia will release its monthly monetary statement.
The only earnings report on the calendar is from Walgreen
No positions in stocks mentioned.
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