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US Markets Ignore Strong Manufacturing Data


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

Chinese money market rates fell last night as the People's Bank of China chose to inject $2.13 billion in cash into the banking system. In the prior eight days the PBoC had neglected to do so, and rates had risen as a result.

The Bank of Japan upgraded its assessment of the Japanese economy by raising 2014 GDP and 2013 CPI forecasts. It also reiterated its commitment to increasing prices to a 2% annual rate by April 2015. Japanese stocks viewed these developments negatively because it brought forward the potential for the Bank of Japan to stop increasing the money supply.

European economic activity continued to slow in October. German retail sales fell 0.4% from the prior month, below expectations. Additionally, the October eurozone consumer price index fell to a 0.7% annual rate from 1.1% in the month prior. This was the lowest reading in four years. The drop prompted speculation that the ECB would cut its main interest rate at its November or December meeting. Previously, economists had believed that a rate cut may not be necessary. The euro fell 1.2% versus the dollar. Lastly, eurozone unemployment rose to 12.2% from the prior month's initial report of 12%.

US equity markets continued to trade lower overnight after yesterday's drop. Stocks traded higher in the opening minutes, but turned sharply lower when the Chicago regional purchasing managers survey showed an explosive level of growth. The Chicago PMI rose to 65.9 from 55.7 in September, led by massive upticks in new orders and production activity. Due to Chicago's heavy correlation to auto manufacturing activity, it is very likely the record new car production that automaker CEOs had predicted is coming to fruition. Jobless claims fell to 340,000 from last week's 352,000.

This morning, Facebook (NASDAQ:FB) fell to $46.38, 20% below its after-hours high on Wednesday. Traders were spooked after the company announced on its conference call that young teenagers were leaving the service. However, the stock made up some of the ground during the day and finished in the green.

Tomorrow's Financial Outlook

Tomorrow the US will report October motor vehicle sales. If today's Chicago manufacturing survey is any indication, it is very likely we will see a sharp increase in sales or indications that sales may pick up in the coming months. The national ISM manufacturing index is due out in the morning. Economists estimate that the index will fall to 55.0 from last month's 56.2.

Manufacturing data is also due out from other countries around the world. China and the UK will release their purchasing manager indices before the US markets open.

Notable earnings reports tomorrow morning include Madison Square Garden (NASDAQ:MSG), Chevron (NYSE:CVX), and Berkshire Hathaway (NYSE:BRK).

Twitter: @Minyanville

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No positions in stocks mentioned.

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