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Facebook Hits a Grand Slam; Fed Stays on Hold


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

Chinese money markets continued to rise overnight; the Shanghai Interbank Overnight Rate (SHIBOR) rose by 78 basis points to 5.23% indicating further stress in Chinese lending markets. The central bank has neglected to inject cash into the banking system over the past two weeks as reverse repo contracts have matured.

The ECB's quarterly Bank Lending Survey found that banks were likely to ease corporate lending standards in the fourth quarter for the first time since the fourth quarter of 2009. Standards for consumer credit and mortgage loans would also be reduced.

The main event today was the conclusion of the Fed's two-day monetary policy meeting. The Fed's statement, released at 2:00 p.m. EDT, indicated that the Fed saw growth in consumer spending and business investment, in data that had been released since the government shutdown ended. Additionally, the Fed also removed language from the statement pertaining to tightened financial conditions. The US dollar rallied and US Treasuries and equities sold off in response, likely because market expectations had been for a slightly more dovish statement.

All S&P 500 (INDEXSP:.INX) sectors declined today, and market internals were weak, though most of the losses suffered following the FOMC's statement were recovered by the close of trading. More worrisome was the decline in the small caps, which underperformed the S&P 500 by 0.90%. The worst-performing sectors were energy and consumer staples.

The ADP released its October private payrolls report this morning. The report indicated that there was a net gain of 130,000 payrolls for the month. Economists had been expecting gains of 150,000. The prior month was revised down to 145,000 from 166,000. September Consumer prices rose 1.2% year-over-year, in line with economist expectations.

Social media giant Facebook (NASDAQ:FB) reported fourth-quarter earnings that were significantly above analysts' estimates as its mobile advertising business continued to accelerate. The stock was up over 10% in extended trading.

Tomorrow's Financial Outlook

Tomorrow morning the Labor Department will release jobless claims for the past week. Due to recent computer upgrades in California, claims data has been distorted higher and should continue to trend back to an average of 335,000. Also due out are the regional Chicago and Milwaukee manufacturing surveys.

There will be a lot of economic data released tomorrow around the world. The Bank of Japan will make its monthly monetary policy statement, which is expected to turn a bit more dovish due to a slower rate of growth in inflation and employment. Also due out is Australian credit growth, German retail sales, Japanese housing starts, and the eurozone's unemployment rate. Lastly, Canada will release its advance estimate of third quarter GDP.

Fifty-three major US companies will report earnings tomorrow. Notable reports include Exxon Mobil (NYSE:XOM), Clorox (NYSE:CLX), Time Warner Cable (NYSE:TWC), Mastercard (NYSE:MA), AIG (NYSE:AIG), ConocoPhillips (NYSE:COP), and Discovery Communications (NASDAQ:DISCA).

Twitter: @Minyanville

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