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US Equities Pummeled on First Day of February Trading


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

US stocks were pummeled on the first trading day in February following poor manufacturing results. The national ISM manufacturing index fell to 51.3 in January from 56.5 in the month prior, well below the economist estimate of 56.0. The poor result is likely due to the extreme cold weather and does not signify a negative trend in manufacturing activity, yet it was still worrisome. The new orders and production components of the survey fell sharply.

Trading activity was very volatile today with composite volume on the NYSE running at 119% of the already elevated 10-day average. The small-cap Russell 2000 (INDEXRUSSELL:RUT) lost as much as 3.5% in today's trading, closing down 3.21% for the session. The Dow Jones Industrial Average (INDEXDJX:.DJI) lost 2.07% for the session, closing below its 200-day moving average for the first time since November 2012. In addition, a key level of technical support was violated when the S&P 500 (INDEXSP:.INX) broke below 1,772.

Fixed income assets were relatively muted, though, as the sell-off was mostly constrained to equities. The 10-year Treasury yield declined by six basis points and benchmark credit indices lost about two basis points.

Manufacturing PMIs across the rest of the world also left much to be desired. The official Chinese manufacturing PMI fell 50.5 in January from 51.0 in the month prior, similar in magnitude to the drop seen in the private Markit manufacturing survey last week. The UK manufacturing PMI fell to 56.7 from 57.2 in December 2013. This is still strong, but it appears to have peaked recently.

January vehicle sales showed poor performance, also due to the extreme weather during the month. General Motors' (NYSE:GM) sales fell 12% in the month, Ford (NYSE:F) fell 7.5%, and other manufacturers experienced equally poor results. Total industry sales fell to a seasonally adjusted annual rate of 15.16 million from 15.30 million in the month prior, worse than the 15.70 million estimate.

Tomorrow's Financial Outlook

Tomorrow will be the lightest day of the week in terms of economic-data releases. The only report scheduled for release is December 2013 factory orders. It is estimated that orders will fall 1.6% from the month prior, after rising 1.8% in November. Fed Presidents Lacker and Evans will give speeches before noon.

The Reserve Bank of Australia's rate decision overnight will be the highlight for foreign-exchange markets. Due to stronger-than-expected inflation data in January, it is expected that the central bank will temper its easing bias.

There are 31 major US companies scheduled to report earnings tomorrow. Notable names include Archer Daniels Midland (NYSE:ADM), Emerson Electric (NYSE:EMR), Sirius XM (NASDAQ:SIRI), Arch Coal (NYSE:ACI), Gilead Sciences (NASDAQ:GILD), HCA Holdings (NYSE:HCA), and Buffalo Wild Wings (NASDAQ:BWLD).

Twitter: @Minyanville

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No positions in stocks mentioned.

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