Emerging Market Gyrations Cause Sell-Off in US Equities

By Minyanville Staff  JAN 23, 2014 4:35 PM

Today's financial recap and tomorrow's financial outlook.

 


Weak Chinese manufacturing data from January was the main culprit for losses in global equities today. The preliminary reading of manufacturing PMI declined to 49.6 from 50.5 the month prior, below the 50.3 estimate. This was the first month that the index had fallen below 50 -- which is considered contractionary -- since July of last year. In addition, the preliminary gauge of January eurozone PMI showed strong growth in the month, reaching 53.9 from 52.7 the month prior.

A number of actions by central banks around the world jolted foreign-exchange markets. The Turkish central bank made a surprise intervention into the country’s foreign-exchange market by selling dollars and other major currencies in an attempt to stem sharp losses in the lira. Elsewhere, the PBoC injected another $26.43 billion in funds to the country’s financial system through reverse repurchases and deposit sales. The moves were made to help ease the seasonal cash crunch before the Lunar New Year holiday.

US equities experienced a day of outsized selling. The benchmark S&P 500 (INDEXSP:.INX) declined by 0.89%, nearly breaching its lows of the year. The sell-off was led by sharp losses in financial, material, and industrial stocks. Notably, the USDJPY pair fell 1.48% in today’s trading, which undoubtedly was the culprit for some of the losses in stateside equities.

The preliminary gauge of US manufacturing PMI for January fell to 53.7 from last month’s 54.4, well below economists’ estimates of 55.0. The index reflected a slowdown in output, new orders, and employment. Also, December 2013 existing home sales rose to a seasonally adjusted annual rate of 4.87 million from 4.82 million in the month prior. The previous month was revised down to 4.82 million from the first estimate of 4.90 million.

Shares of Apple (NASDAQ:AAPL) rose intraday after activist investor Carl Icahn announced that he had purchased an additional $500 million worth of stock in the company, bringing his ownership stake to $3.6 billion. Icahn also released a letter to shareholders calling for a significant increase in Apple's share repurchase program.

Netflix (NASDAQ:NFLX) rose an impressive 16.56% after reporting significantly better-than-expected fourth-quarter results yesterday, including very strong growth in its streaming video business.

Tomorrow's Financial Outlook

There will be no major US economic reports tomorrow. There will be a significant number of earnings reports, however. Notable reports include Honeywell (NYSE:HON), Bristol-Myers Squibb (NYSE:BMY), WW Grainger (NYSE:GWW), Procter & Gamble (NYSE:PG), Stanley Black & Decker (NYSE:SWK), Xerox (NYSE:XRX), and State Street (NYSE:STT).

There are only two global economic reports to note on tomorrow’s schedule: the UK BBA Loans Approved for House Purchase and the December 2013 Canadian consumer price index. Economists estimate Canadian consumer prices will be up 1.3% from a year ago.

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