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Deleveraging Across All Asset Classes Continues


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

The Shanghai Composite had its largest fall in over four years today, dropping 5.3% as Chinese government continued to inject liquidity to prop up its financial system. Fears of a credit crunch have pushed the Chinese index lower for the past four trading days. The major European markets were in the red as well. The FTSE 100 (INDEXFTSE:UKX) lost 2.12% on the day.

The Dallas Fed Manufacturing Survey came in better than expected this month, coming in at 6.5 vs. the consensus 0.0. The forward-looking new orders subindex rose to 13 from 6.2, and the employment subindex rose to 0.2 from -6.3.

The S&P 500 (INDEXSP:.INX) opened low and continued lower, trading down to as low as $1,560. After the European closing bell, markets began to recover and finished the day down 0.8%. The materials and industrials sectors were the worst performing sectors, both down more than 2%, with utility stocks around unchanged. Market breadth remained very negative with declining stocks outnumbering advancing socks on the NYSE 6.5 to 1.

The 10-year Treasury yield pushed past 2.6%, but came back down to finish at 2.53%. Longest-duration Treasuries continued to be the best performers as overall inflation expectations remain unchanged. Crude recovered from recent losses, and finished the day up 1.5%.

The Gloom, Boom and Doom Report's editor Marc Faber announced today that he believes the S&P 500 could fall 20% to 30% from current levels.

Tomorrow's Financial Outlook

Italian retail sales will be released at 4:00 a.m. EDT tomorrow morning.

US durable goods orders will be released at 8:30 a.m. EDT. New orders are expected to see month-over-month growth of 3.3%. The S&P/Case-Shiller home price index will be released at 9:00 a.m. EDT tomorrow morning. Economists expect the 20-city seasonally adjusted month-to-month growth to be 1.5%.

New home sales will be released at 10:00 a.m. EDT tomorrow morning. The Street expects new sales to come in at 460,000 after seeing 454,000 last month. The consumer confidence index is expected to report a reading of 75.0, after seeing a multi-year high reading last month.

Apollo Group Inc (NASDAQ:APOL), Barnes & Noble, Inc. (NYSE:BKS), Lennar Corporation (NYSE:LEN), and Walgreen Company (NYSE:WAG) are all releasing their quarterly earnings reports tomorrow.

Twitter: @Minyanville

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