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Personal Income Spikes After December's Special Dividend Craze

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

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US economic data showed a large jump this morning, but the market effect was more muted. Personal income in December jumped 2.6% from November, but the major reason for the big increase was the huge influx of special dividends paid out in December by companies and companies who accelerated their dividend payments from January to December due to perceived tax increases. Dividend income rose at a rate of 34.3% month-to-month, accounting for a $268 billion annualized increase in disposable income.

Two other pieces of economic data pushed the market higher. Weekly jobless claims rose to 368,000 from 330,000 the month prior, highlighting the concern that the claims were being affected by seasonal disruptions. The Chicago PMI rose to 55.6 from last month's revised lower 50.0, well ahead of the 50.5 estimate. The large move was highlighted by a jump in new orders, inventories, and products shipped. As inventories had declined during the fourth quarter, it is thought that businesses will need to increase production to make up the difference.

The two laggards yesterday, the Russell 2000 and the Dow Transports, led the market today. The S&P 500 was slightly negative and Treasuries rallied slightly on the day.

Fusion-io (NASDAQ:FIO) fell 13% from yesterday's close after drastically missing earnings last night. The company forecast revenues declining to $80 million in the coming quarter, well worse than the Street estimate of $133 million.

Tomorrow's Financial Outlook

Tomorrow morning will be the monthly jobs report. For January, nonfarm payrolls are expected to show a seasonally adjusted monthly gain of 165,000, up slightly from 155,000 last month. Earlier this month, the ADP private payrolls report showed a small decline month-to-month and as such, estimates have come up slightly since that report. Later in the morning, the ISM will release its monthly manufacturing index. Because regional Fed manufacturing surveys have been highly negative and the Chicago PMI today was a big positive, it is hard to guess what this report may show. Economists are expecting a reading of 50.5, slightly expansionary and little changed from last month's 50.7.

It's also PMI day around the world. China and Germany will both release manufacturing PMI in the morning before the US open. The eurozone will also release the euro-wide unemployment rate.

In earnings, Exxon Mobil (NYSE:XOM), Merck (NYSE:MRK), National Oilwell Varco (NYSE:NOV), Mattel (NASDAQ:MAT), Legg Mason (NYSE:LM), Chevron (NYSE:CVX), Standard Pacific (NYSE:SPF), Tyson Foods (NYSE:TSN), and Wynn Resorts (NASDAQ:WYNN) will all report.

Twitter: @Minyanville

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No positions in stocks mentioned.

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