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US Markets Throw a 'Taper' Tantrum


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

Overnight, the Reserve Bank of Australia kept its main interest rate on hold at 2.75% saying that its current stance on monetary policy remains appropriate, but that continued low inflation and high exchange rates relative to declining export price indices may enable interest rates to be lowered further. The Aussie dollar fell against the other major currencies, but this may be due in part to increased margins for AUD futures on the CME.

In the US, stocks opened higher after 20 straight positive closes on a Tuesday, but quickly reversed into the red. The sectors that were most negative were energy, industrials, financials, and tech, the latter two being the most notable as there had been rotation into them recently. Market breadth was negative so the strength of the rally is suspect. The S&P 500 (INDEXSP:.INX) reached a low of 1623.60, which was down 16.5 points and a point above yesterday's low of 1622.60 before mounting a reversal rally into the close and still finishing in negative territory.

Treasuries were weak throughout the day, barely making it back to the unchanged mark only once. The 10-year Treasury yield was 2.3 basis points wider to 2.142% at the close of equity trading. Commodities, in particular the metals, were weaker throughout the day on a generally stronger dollar.

Dollar General (NYSE:DG) was demoted today after reporting earnings. The company had in-line metrics for the quarter, but forward EPS guidance was lowered significantly for the year due to moderate sales growth and a lower-than-expected gross profit rate. Dollar General's stock fell 10%.

Tomorrow's Financial Outlook

Tomorrow we'll get a preview of what Friday's Labor Department payrolls report may end up at, with the ADP private payrolls report and the ISM non-manufacturing or services index. With its new, in-depth survey methods, the ADP payrolls is technically more accurate than the government's nonfarm payrolls. The consensus estimate foresees 165,000 payroll gains, up from 119,000 last month. It is worth noting that last month's 119,000 diverged from the government's 176,000. The ISM non-manufacturing index is expected to remain relatively constant at 53.5 from 53.1 last month.

On the global front, the eurozone will release the second estimate of its manufacturing PMIs; no change is expected. More importantly, the eurozone will release its first estimate of 1Q GDP and last month's retail sales. Lastly, the UK will release its services PMI while HSBC will release its Chinese services PMI.

In earnings, Hovnanian (NYSE:HOV) and Verifone (NYSE:PAY) are the only notable reports on the calendar.

Twitter: @Minyanville

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