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Emerging Markets Rally Following ECB Rate Decision

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

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The European Central Bank chose to keep its policy rates unchanged at its meeting early this morning. Some economists had been calling for a marginal cut to the benchmark interest rate, which is already close to zero at 0.25%. In his regularly scheduled press conference, President Mario Draghi noted that the ECB was closely monitoring money-market developments and stood ready to act with all of the tools at its disposal.

Because Draghi has previously said that the ECB would do "whatever it takes," investors took this as an indication that things were not as bad as they seemed, and if they do get worse, the ECB will act. Draghi also mentioned that he was not overly concerned with the developments in emerging markets, and that Europe didn't seem to be greatly affected. Following Draghi's comments, emerging market stocks led US and European indices higher. Emerging market currencies that have been under pressure, such as the Turkish lira, Russian ruble, and Brazilian real, performed well today.

Weekly jobless claims fell to 331,000 this past week, down from 351,000 in the week prior. More importantly, the December 2013 trade deficit widened to $38.7 billion from $34.6 billion in November. This was worse than the -$36 billion estimate.

US stock markets traded erratically after the ECB rate decision and press conference, but ultimately rallied and worked off oversold conditions to test key resistance at SPX 1,772. Surprisingly, the rally had strong participation from defensive sectors such as utilities and consumer staples, though materials and consumer discretionary stocks were the best performers. The S&P 500 rose 1.24% in today's session.

Coca-Cola (NYSE:KO) announced last night that it was taking a 10% stake in Green Mountain Coffee Roasters (NASDAQ:GMCR) in an attempt to challenge Sodastream's (NASDAQ:SODA) do-it-yourself beverage service. Coca-Cola has the option to purchase an additional stake in the company over the next three years. Green Mountain was up 26.16% in today's trading.

Tomorrow's Financial Outlook

The most important market event is scheduled for tomorrow morning. The BLS will release official January nonfarm payrolls at 8:30 a.m. EST. The consensus economist estimate is for a net gain of 180,000 payrolls during the month. The net payroll gain in December 2013 was 74,000, though that is an outlier compared to gains seen throughout 2013. The unemployment rate is forecast to stay unchanged at 6.7% in January.

There will be a number of economic data reports overseas tomorrow. The HSBC/Markit services PMI, German trade balance, and UK trade balance are scheduled to be reported. In addition, UK and German industrial production figures from December 2013 will be released.

It's a light day tomorrow in terms of earnings. The only notable reports will come from Apollo Global (NYSE:APO), Wyndham Worldwide (NYSE:WYN), and Madison Square Garden (NASDAQ:MSG). All are scheduled to report before the open.

Twitter: @Minyanville

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No positions in stocks mentioned.

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