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Bank of Japan Turns the Dial to Unlimited


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

The big story today was the Bank of Japan's decision overnight to raise its inflation target to 2% from its previous target of 1% in an effort to combat the recurring deflation in the Japanese economy. The one surprise was the central bank's decision to hold off on unlimited, open-ended purchases of Japanese government bonds and other assets until 2014. Previously, newswires had reported that the central bank would pursue a purchase plan of up to 13 trillion yen in assets.

Divergences showed themselves in the market today as both equities and bonds rallied. In stocks, defensive sectors like Utilities, and leading sectors like Financials, both outperformed the market.

US economic data was on the weaker side today and it led to a brief sell-off in the morning, but was quickly met by buying throughout the rest of the day. The Richmond Fed's manufacturing index showed serious deterioration to -12 in January, much lower than the 5 that was expected as the aftereffects of Hurricane Sandy continued to reverberate up and down manufacturing on the East Coast. This follows abnormally large misses from the Philadelphia and New York Fed manufacturing indexes last week. Existing home sales slowed to a seasonally adjusted annual rate of 4.94 million in December 2012.

On the earnings front, Traveler's (NYSE:TRV) showed a smaller-than-expected decline in the fourth quarter, resulting from decreased catastrophe losses associated with Hurricane Sandy. TD Ameritrade (NYSE:AMTD) reported better earnings after seeing record inflows in new client assets and better daily trading volume.

After the close, Google (NASDAQ:GOOG) reported better EPS at $10.65 versus $10.50 estimates, but missed revenues at $12.16 billion versus $12.36 billion estimates. Regardless, the stock jumped more than 3% as the company noted increased capex spending moving forward.

Tomorrow's Financial Outlook

The rapid pace of earnings reports will continue unabated tomorrow, with more than two-dozen major companies set to report. Most notably will be Apple's (NASDAQ:AAPL) report, which has been the most anticipated earnings report of the quarter. Other notable reports include Netflix (NASDAQ:NFLX), F5 Networks (NASDAQ:FFIV), McDonald's (NYSE:MCD), and SanDisk (NASDAQ:SNDK).

The only economic data report from the US will be the monthly home price index, which is expected to continue its multi-month rise to 0.7% from 0.5% the month prior. Globally, the UK will release employment data from the month of December and the eurozone will report consumer confidence figures.

Twitter: @Minyanville

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