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German Olive Branch and FOMC Minutes Buoy Stocks

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

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Global markets were higher led by Chinese and Japanese equities overnight, which carried over into the US session. Eurozone inflation for December dropped by 0.2% from a year ago, down from +0.3% in the month prior. This further cemented expectations that the ECB would expand the breadth of its asset purchase program at its meeting in two weeks. Considering the drop off in risk assets over the past two weeks, this was enough to propel prices higher.

The minutes of the Fed's December meeting were released this afternoon. The minutes did not offer any great differences from what Janet Yellen discussed in her post-meeting press conference last month. The FOMC members view the change in language to "patience" gives them flexibility in determining the appropriate time for monetary policy tightening in the coming months. They do not see that beginning until the April meeting. They also said that it would be possible to begin raising rates even if core inflation remains at current levels, that is below their target of 2%.

The ADP private payrolls report from December showed a net gain of 241K jobs from the prior month, which was ahead of the 225K expected. The prior month's report was also revised up from 208K to 227K. Also, the November trade balance narrowed to -$39 billion from -$42.7 billion in the month prior, led by a drop in oil imports to the lowest since 2010, and the quantity to the lowest since 1994. Treasuries did not react greatly to the news and ended up closing positive from their pre-report levels.

The S&P 500 (SPX) closed up 1.16% for today's session led by health care and consumer stocks. There was also heavy buying of financial stocks throughout the day. Another piece of news help boost stock prices. News reports indicated that German Chancellor Merkel was softening her tone on negotiations with Greece that had previously caused concern amongst market participants. Merkel now appeared to be ready to renegotiate the interest rates on Greece's debt to various European entities so long as it kept to its austerity program and debt forgiveness was out of the question. The Syriza party, which holds a 3.2% lead in the polls according to a survey taken today, has ran on the promise that it will remove the austerity measures and potentially leave the Eurozone.

Crude oil gained 1.88% in today's session after dropping 10% in the first three trading days of the year. Government inventories that were reported today showed a substantial draw and uptick in refinery activity, which was a positive for the commodity.

Tomorrow's Financial Outlook

Tomorrow will largely be a setup for Friday's payrolls report. Weekly jobless claims are scheduled to be reported in the morning with a moderation back down to 290K from the prior week's 298K. The 4-week moving average stands at 290.75K. Also scheduled to be reported is November consumer credit.

The major global economic decision tomorrow is the Bank of England's monthly rate decision. Although two of the central bank's Monetary Policy Committee members have dissented at the last four meetings calling for a rate hike, market expectations don't price the first rate hike until 2016. Also scheduled for release are Eurozone retail sales and producer prices, and German factory orders.

Constellation Brands (STZ), Family Dollar Stores (FDO), and Bed Bath & Beyond (BBBY) are the major US companies scheduled to report earnings tomorrow.

Twitter: @Minyanville

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No positions in stocks mentioned.

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