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Congress on Track to Raise Debt Ceiling, Stocks Breathe a Sign of Relief


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

The People's Bank of China said overnight in a Q&A statement posted on its website that a larger than expected trade surplus and the US's delayed exit from QE had led to significant foreign capital inflows into the country. Because of this, the central bank said that credit expansion in the country was relatively large in September. In other global news, UK jobless claims fell more than anticipated in September.

US equities were buoyed by news that Congress had come to an agreement on extending the debt limit and re-opening the government. The proposed deal by the Senate -- which, at the time of this writing, is set to be voted on later this evening -- would re-open the government until January 15 and extend the debt limit until February 7. Under the terms of the deal, the Treasury department would be able to use extraordinary measures to extend its cash position until July once its borrowing power is exhausted. House Republican officials endorsed the plan, even if it requires bipartisan support to be passed.

The S&P 500 (INDEXSP:.INX) rallied 0.7% in the opening minutes on the news and eventually closed up 1.38%. Financial sector stocks were the best performers. Technology and industrial stocks were the worst performers. The Fed's Beige Book saw growth continuing at a modest to moderate pace. Business contacts noted that they had restrained long-term capital investment due to uncertainties over the Affordable Care Act and debt ceiling. The NAHB survey of builder sentiment declined to an index reading of 55 from last month's 57. The economist estimate was for no change.

In earnings news, the big story was banks as Bank of America (NYSE:BAC), BB&T (NYSE:BBT), KeyCorp (NYSE:KEY), and PNC (NYSE:PNC) all beat analysts' expectations. Financial sector stocks rose 2.04% today. After the close, IBM (NYSE:IBM) reported earnings. The company missed on the current quarter's revenues and reaffirmed guidance for full-year EPS.

Tomorrow's Financial Outlook

The US will release the prior week's jobless claims in the morning before the market opens. Jobless claims are expected to fall to 335,000 from 374,000 in the prior week. The prior week's claims were negatively affected by two weeks of backlogs due to computer upgrades in two states. The 4-week moving average of claims is currently at 325,000. The Philadelphia regional manufacturing survey is expected to fall to 15.0 from 22.3 last month. The survey's reading would still indicate strong growth.

Should all things go as planned this evening, the government should re-open tomorrow and the debt ceiling will be extended until February.

Global market-moving news includes UK retail sales, Japanese machine tool orders, and Australian business confidence.

Thirty-two major US companies will report earnings for the third quarter tomorrow. Notable reports include Goldman Sachs (NYSE:GS), Fifth Third Bancorp (NYSE:FITB), Phillip Morris (NYSE:PM), Union Pacific (NYSE:UNP), Verizon (NYSE:VZ), Google (NASDAQ:GOOG), and Chipotle (NYSE:CMG).

Twitter: @Minyanville

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