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S&P 500 Works Off Overbought Conditions


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

Bank of England Governor Mark Carney delivered the central bank's quarterly inflation report today, saying that even though unemployment likely reached 7% in January, that the BoE did not plan to raise its main rate for some time due to low inflation. In Europe, ECB Board Member Benoit Coeure said that the central bank was seriously considering a negative deposit rate, but that he did not expect the move to have too big of an effect.

China's trade surplus grew to $31.86 billion in January, up from $25.64 billion in the month prior, and well above the $23.45 billion expected. The rise was driven by very strong growth in exports and equally strong growth in imports. In particular, copper imports grew substantially. Exports grew 10.6% from a year ago. The surprise growth in China's trade augurs well for economic activity across the rest of the world, especially because recent reports from China have been less than stellar.

US equities worked off overbought conditions and traded sideways after the S&P 500 (INDEXSP:.INX) gained 3.89% in the last four sessions. An early rally was met by selling and the main indices hovered around unchanged for the rest of the day. Seven of the 10 basic S&P sectors finished in the negative, the worst being consumer staples stocks.

The Senate advanced the debt ceiling bill that was passed by the House of Representatives last night. A final vote is expected some time this afternoon or evening. The deal would extend the US's borrowing authority until March 15, 2015.

Cisco (NASDAQ:CSCO) reported earnings after the market close, beating on EPS and revenues. Earnings per share were $0.47 vs. the expected $0.46, and revenues were $11.16 billion vs. the $11.03 billion that was expected. In addition, the company boosted its quarterly dividend to $0.19 per share from $0.17, though this was below the $0.20 analysts had been expecting. Gross margins were weak at 61.3% vs 61.9%, however.

Tomorrow's Financial Outlook

January retail sales will be released tomorrow morning. Up to this point a large number of retailers have reported less-than-stellar guidance for the month of January and the quarter, which has expectations very low. In addition, retail stocks have also bore the brunt of some outsized selling. Economists estimate that sales will be unchanged month-to-month after rising 0.2% in December 2013. Private business inventories and weekly jobless claims are also scheduled to be reported.

The scheduled testimony for Janet Yellen to the Senate Banking Committee was postponed this afternoon while the final debt ceiling bill is passed. No new date and time were announced for the hearing.

Australia will release its January employment data overnight. If employment growth remains strong and inflation strengthens, it may give the RBA reason to become less dovish in its outlook. Also scheduled to be reported is January German CPI and the ECB's monthly report.

Thirty-three major US companies are scheduled to report earnings tomorrow, making it the busiest day of the week. Notable reports include Pepsi (NYSE:PEP), Apache (NYSE:APA), Starwood Hotels & Resorts (NYSE:HOT), Generac Holdings (NYSE:GNRC), Kraft (NASDAQ:KRFT), and Cliffs Natural Resources (NYSE:CLF).

Twitter: @Minyanville

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