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Global Equities Come Under Pressure


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

Overnight in Japan, the government denied previous news reports that it was considering lowering the corporate tax in conjunction with raising the personal sales tax, causing Japanese markets to record a 2.12% drop. Finance Minister Aso did note that there was support for the proposed sales tax increase, which is scheduled to take place in three different phases over the next year.

US markets came under pressure early and remained under pressure throughout the day, closing near the lows of the day. The large-cap S&P 500 (INDEXSP:.INX) was down 1.43% and the small-cap Russell 2000 (INDEXRUSSELL:RUT) was down 1.85%. Initial jobless claims fell to 320,000 from 335,000 the week prior, the lowest reading since October 2006. Market breadth remained skewed to the downside with declining stocks outnumbering advancing stocks by a margin greater than 6:1. Gold performed remarkably today, rising 3.5% from its intraday low.

Housing-related stocks reversed early losses to finish in positive territory. The August NAHB homebuilder survey showed another increase in optimism. The survey increased to a reading of 59 from the prior month's 56. July consumer price index rose 2% from a year ago, inline with estimates and up from a 1.8% rate the month prior.

The first two glimpses of August manufacturing were released today and both showed slowing growth. The New York regional manufacturing general business conditions index declined to a reading of 8.24 from 9.46 the prior month, with declines in new orders and shipments with increases in employees and inventories. The other survey, from Philadelphia, declined to a reading of 9.3 from 19.8 the month prior. Lastly, industrial production in July was flat on a monthly basis, down from a 0.2% gain in the month prior.

Wal-Mart (NYSE:WMT), the consumer bellwether, sharply missed earnings for the second quarter and guided down on earnings-per-share for the rest of the year. The company cited a continually challenging consumer and economic environment for the earnings miss. Wal-Mart closed down 2.62% today.

Tomorrow's Financial Outlook

The major pieces of housing data for July will be released tomorrow morning in the form of housing starts and building permits. Economists are expecting starts to increase to an adjusted annual rate of 903K from last month's 836K, and permits to increase to 950K from 918K. Note that July's retail sales saw building materials decline by 0.4%, so a miss versus the consensus is likely already priced in. The other piece of economic data to be released is the preliminary estimate of the University of Michigan/Reuters consumer confidence index. The index is estimated to rise to 85.5 from 85.1.

Also, tomorrow will be options expirations for US stocks.

Global economic data is light with only the eurozone consumer price index scheduled.

US companies scheduled to report earnings include Buckle (NYSE:BKE), Enstar Group (NASDAQ:ESGR), and Main Street Capital (NYSE:MAIN).

Twitter: @Minyanville

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