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Increased Chinese and European Manufacturing Growth Boosts Stocks

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

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Chinese and eurozone manufacturing growth accelerated in October according to surveys of purchasing managers. The Markit Chinese manufacturing PMI rose to 50.4, beating the economist estimate at 50.9. Eurozone manufacturing PMI rose to 51.3, but was below the 51.4 estimate. Services growth slowed to 50.9 from 52.2 in September.

Chinese money market rates continued to rise as the government chose not to inject cash back into the Chinese financial system. Overnight interbank lending rates rose 0.31% to 4.09%. Two days ago those rates were 3.05%. These rises in rates have increased tension throughout Chinese markets because it is believed that the government may rein in loose real estate lending, a strong driver of economic growth in China.

S&P 500 (INDEXSP:.INX) futures were up eight points overnight, but sold off in early trading. Markets did recover some of these early losses and the the S&P finished up 0.29%. Consumer discretionary sector stocks were the best performers today, led by gains from Delta Airlines (NYSE:DAL), Southwest Airlines (NYSE:LUV), and McKesson (NYSE:MCK). Delta and Southwest both beat on earnings and McKesson announced it would buy German pharmaceutical wholesaler Celesio (ETR:CLS1). Telecom sector stocks were the worst performers due to AT&T's (NYSE:T) guidance that it was reducing capex spending through 2014.

Jobless claims fell to 350,000 from 362,000 in the last week. The Labor Department noted that California is still working through a backlog of claims following computer upgrades last month, which is temporarily distorting claims higher. The Labor Department also noted that 44,100 federal workers filed claims two weeks ago when the government was partially shut down. A preliminary survey of US manufacturing activity fell to 51.1 from 52.8 last month on slowdowns in business activity and new orders.

Tech giant Microsoft (NASDSAQ:MSFT) released very strong earnings after the close. Earnings per share were $0.62, beating the $0.54 estimate. Revenues rose 16% from a year ago to $18.53 billion, more than the $17.77 billion estimate. The stock was up 7% in the post market.

Twitter released its S-1 filing saying that it would sell 70 million shares at an IPO price of $17.00 to $20.00. The company will list its stock on the NYSE. The filing implies a value of $12.8 billion.

Tomorrow's Financial Outlook

Tomorrow morning the US will report September durable goods and capital goods orders. Because the headline durable goods orders is heavily influenced by large aircraft orders from Boeing (NYSE:BA), economists frequently remove these large aircraft orders to get a better sense of the real growth . Orders ex-transports are forecast to rise 0.5% from the prior month. The second and final estimate of the University of Michigan/Reuters consumer confidence index is forecast to be little at 75.0 from the first estimate of 75.2.

The UK will release its advance estimate of third quarter GDP tomorrow morning before the US market opens. Growth from a year ago is expected to accelerate to 1.5% from 1.3% in the prior quarter. The IFO institute will release its sentiment reading of German financial experts' feelings on the current and future economic situation.

Sixteen major US companies will report earnings tomorrow morning before the market opens. Notable reports include Procter & Gamble (NYSE:PG), UPS (NYSE:UPS), Moody's (NYSE:MCO), and National-Oilwell Varco (NYSE:NOV).

Twitter: @Minyanville

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