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Government Shutdown Dominates the Day's Trading

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

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The political spectacle out of Washington dominated the show today. Last night, Senate Majority Leader Harry Reid accelerated the debate in the Senate to approve a spending bill that would keep the government open. The Senate's bill did not include a resolution that would halt support for the Affordable Care Act (aka Obamacare). Later in the day, President Obama supported the bill with the compromise that the resolution would only extend the government's stopgap funding until November 15. House Speaker John Boehner said that he did not expect to see a similar version of the resolution that was passed in the Senate pass in the House, but he also said that the GOP did not want to see a government shutdown. Additionally, he said that Obama could not avoid negotiations over the debt ceiling.

In overseas news, the criminal conviction and potential expulsion of ex-Italian Prime Minister Silvio Berlusconi continued to create uncertainty in the Italian Parliament. Italian's fellow PDL lawmakers have threatened to all resign in protest over Berlusconi's expulsion from Parliament. This will determine whether or not there is confidence in current Prime Minister Enrico Letta's government. Letta will meet with Italian President Giorgio Napolitano tomorrow to verify that there is support for his government in Parliament. If Berlusconi's allies step down, it could lead to the dissolution of Parliament and new elections.

US equity indexes shot higher at the market's open, breaching back through the 1700 level on the S&P 500 (INDEXSP:.INX). However, these gains were retraced; the major indexes traded slightly positive for the rest of the day. Banks stocks were a notable laggard today. The KBW Bank Index (INDEXDJX:BKX) was down 0.5% or more for much of the day. Telecom and consumer staple stocks were the notable outperformers.

Weekly initial jobless claims fell to 305,000 from last week's 310,000. The Labor Department noted that California had caught up with its claims backlog after upgrading its systems two weeks ago. The third and final estimate of third-quarter GDP was unchanged at an annualized rate of 2.5%. Economists had projected that the last estimate would rise to 2.6%. Notably, the GDP price index fell to 0.6% from the prior two estimates of 0.8%. Pending home sales fell 1.6% in August from the month prior to an annual rate of 2.9%. That rate is the slowest it has been since April 2011.

Weekly natural gas inventories showed a build of of 87 billion cubic feet (bcf) versus an estimated build of 75 bcf to 80 bcf. Natural gas futures initially fell, but settled higher on the day.

Nike (NYSE:NKE) reported earnings after the close, beating on the top and bottom lines. The company's future orders rose 10% vs the 7.7% estimate, implying a pickup in activity in the coming quarters. Nike is typically a very good indicator of global retail activity.

Tomorrow's Financial Outlook

Tomorrow morning, August personal income and spending figures will be released. Consistent with the 0.4% wage growth in August's payroll report, incomes are estimated to have risen 0.4% in August. Spending growth is estimated to have risen 0.3% from the prior month, despite lagging durable goods orders and retail sales. The second and final estimate of the University of Michigan's consumer confidence index is estimated to rise to 78.0 after the first estimate showed a decline to 76.8.

Other market-moving news on the calendar includes China's release of industrial profits, the eurozone's measure of consumer confidence, and German consumer price indexes. Earlier this month, preliminary German consumer confidence indexes showed a downturn in forward economic expectations.

There will be no major earnings reports tomorrow.

Twitter: @Minyanville

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