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Slightly Hawkish FOMC Minutes Turn Markets Lower


End of Day Roundup: Today's financial recap and tomorrow's financial outlook.

US equities opened higher today, making a new high for the month. The S&P 500 (INDEXSP:.INX) rose seven points shortly after the opening, but dropped after negative comments from the IMF and the release of the FOMC's minutes. The sell-off continued in the last hour, and the benchmark index broke below yesterday's low. The S&P closed down 0.65% and the coincident VIX Index (INDEXCBOE:VIX) rose 1.63 points to 15.50. Sector performance showed financials underperforming by a noticeable margin, losing 1.27% today while telecom and energy were in the green. Natural gas had another banner day; the March future gained 11.47% and its structure remains in backwardation, further highlighting the supply shortage.

New housing starts showed a precipitous drop in January, falling to a seasonally adjusted annual rate of 880,000. Economists had expected starts to drop to 950,000. New starts appeared to have been affected by the weather with construction in the Midwest region dropping to the lowest on record in addition to declines in the South and West. However, building activity in the Northeast actually grew, which raises questions on the weather effect in the month. December 2013's starts were revised up to 1.048 million, which softens some of the blow.

The overhauled version of the US producer price index showed much of the same story; the year-over-year rate rose modestly to 1.2% from 1.1% in December, in line with the economist estimate.

The Federal Reserve released the minutes of its January FOMC meeting this afternoon. In it, policy makers generally kept to the same script from the meeting in December of last year. The Fed is likely to keep its policy rates at or near zero through the rest of this year and at least part of the way into 2015. Additionally, with the government's unemployment rate fast approaching the Fed's 6.5% threshold, it will be making changes in the coming meetings. FOMC participants were undecided on whether or not that would mean an actual change to the quantitative threshold or the addition of qualitative guidance. Lastly, the FOMC stated that the economic outlook would have to materially change before it would consider adjusting its pace of tapering asset purchases.

Tesla (NASDAQ:TSLA) reported earnings after the close, beating analyst estimates solidly and reporting strong growth in vehicle deliveries. Tesla expects to deliver more than 35,000 Model S Units in 2014. Deliveries in the fourth quarter, 2013 numbered 6,892. The stock rose more than 11% in post-market trading.

Tomorrow's Financial Outlook

The BLS will release January consumer price indices tomorrow morning. Economists expect the index will increase 1.6% year-over-year after rising at a 1.5% pace in December 2013. Also on tap is the preliminary Markit index of manufacturing growth in February, which is forecast to fall to 53.6 after dropping to 53.7 last month. Lastly, the Philadelphia regional manufacturing survey will be released in the late morning.

Preliminary February data from China and the eurozone is due out tomorrow morning. A number of concerns have been raised about the slowing pace of economic growth in China, and the poor manufacturing data in January added pressure on emerging markets. Also scheduled for release is eurozone consumer confidence and Japan's trade balance.

Twenty-eight major US companies are scheduled to report earnings tomorrow. Notable reports include Walter Energy (NYSE:WLT), Wal-Mart (NYSE:WMT), Nordstrom (NYSE:JWN), (NASDAQ:PCLN), Aruba Networks (NASDAQ:ARUN), Hewlett-Packard (NYSE:HPQ), Newmont Mining (NYSE:NEM), Rocket Fuel (NASDAQ:FUEL), DirecTV (NASDAQ:DTV), Groupon (NASDAQ:GRPN), and Cabot Oil & Gas (NYSE:COG).

Twitter: @Minyanville

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