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Big Down Day Saved by Forward Political Momentum


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

MINYANVILLE ORIGINAL Early trading started negative after news of the Greek bailout deal had begun to sink in. However, the early trading continued negatively and persisted that way for much of the morning. Gold and precious metals futures took a sharp 1.5% dive in the morning after a large block of contracts crossed. The precious metals complex did not recover from the trade and finished the day solidly negative.

Early in the morning, Greek government officials floated the idea that Greece would buy back bonds held by private investors, totaling about 60 to 62 billion euros, at prices of about $0.28 to $0.35 on the dollar . The buyback would be voluntary. Since the new bonds are written under stronger English law, the possibility of bondholders being forced to take the deal is reduced. Unfortunately, this means that the only remaining creditors for Greece would be from the public sector, such as the IMF and ECB.

Also in the morning, market making firm GETCO approached fellow firm Knight Capital (NYSE:KCG) with a cash offer to buy it out at $3.50 per share. Over the summer, Knight Capital incurred a $420 million trade error and required a bailout from fellow financial firms. It is suspected that Virtu Financial will also make a cash bid for Knight Capital this week.

Economic data in the morning was less than stellar. The Commerce Department reported that new home sales fell at a monthly rate of 0.3% or grew at a seasonally-adjusted annual rate of 368,000, lower than the 390,000 consensus estimate. The prior month showed an annual gain of 369,000. This was met negatively by the market.

At one point in the morning, the S&P 500 momentarily breached the 200-day moving average to the downside before House Speaker Boehner released press statements that he was positive he and President Obama could come to an agreement on the budget deal, but that he was opposed to the expiration of the tax cuts on top earners. After the release, the SPX reversed from -1% on the day to close up nearly 1%.

Tomorrow's Financial Outlook

Tomorrow morning the Labor Department will release weekly jobless claims data. The prior two weeks' data have been distorted due to Hurricane Sandy, causing them to show jobless claims of 459,000 and 410,000 -- above the recent four-week average of 365,000. It is likely that this could continue for a third week, but at a reduced pace. Economists expectations are for weekly claims of 390,000.

The second estimate of third-quarter GDP will also be released in the morning. It is expected to rise to 2.8% from the first estimate of 2.0% last month. Later in the morning, pending home sales will be released. The annual rate is expected to increase to 9.1% from last month's 8.5%.

In global economic data, Germany will release unemployment figures and Japan will release employment and inflation data after the US market close. Germany's unemployment rate is expected to remain unchanged at 6.9% from last month. Japan's jobless rate is also expected to remain unchanged at 4.2%.

In earnings, Barnes & Noble (BKS), Ulta Salon (ULTA), Splunk (SPLK), Kroger (KR), and Tiffany (TIF) will report.

Twitter: @Minyanville

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