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Cyclical Stocks Continue to Lead

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

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Overnight the Reserve Bank of Australia cut its main cash rate to 2.75% from 3% citing concerns over slowing growth. About 25% of economists had forecast this rate cut. For background, the Australian unemployment rate rose to 5.6% in March from 5.4% the month prior, so growth had visibly slowed. The Aussie dollar fell by one point versus the Japanese yen.

Today was the first day since May 2 that Japanese markets were open. Consistent with the USDJPY rally from 98 to 99.20 following the better-than-expected nonfarm payrolls data, the Japanese Nikkei rose 3.55%.

US stocks continued their upward trajectory today. Utility stocks, the market leaders this year, bounced off a two-day slump but remain below their recent highs. Cyclical stocks such as Fedex (NYSE:FDX) and Cummins (NYSE:CMI) have also experienced multi-figure rallies off their recent lows, signaling a continued rotation out of defensive sectors and into offensive ones. Treasuries were slightly lower on the day, but traded in a tight five-tick range throughout the US session. The $32 billion auction of 3-year notes at 1 p.m. priced at a high yield of 0.354%, consistent with pre-auction levels and dealer expectations.

March consumer credit was released at 3 p.m. in the afternoon, showing a seasonally adjusted gain of $7.966 billion, lower than the $15.6 billion expected. On a non-seasonally-adjusted basis, revolving credit showed its second straight month of declines while non-revolving credit was buoyed by a $3.9 billion increase in federal government credit.

Tomorrow's Financial Outlook

Tomorrow there will be no economic data released with the exception of the weekly MBA mortgage purchase and refinance index. The Treasury will open $24 billion of 10-year notes at 1 p.m.

On the global front, Germany will release March industrial production data and Canada will release housing starts data. German industrial production is expected to rise 0.3% MoM from a 0.7% gain the month prior. Canadian housing starts are expected to grow at a 175,000 annualized rate in April.

US earnings on the calendar include AOL (NYSE:AOL), News Corp (NASDAQ:NWSA), Green Mountain Coffee Roasters (NASDAQ:GMCR), Groupon (NASDAQ:GRPN), and Tesla Motors (NASDAQ:TSLA).

Twitter: @Minyanville

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No positions in stocks mentioned.

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