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Market Participants Reduce Risk Before New Years


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

Greece was another point of fear today. The US dollar weakened early on as the Chinese government made it easier for domestic banks to hold foreign currencies without having to hold high levels of reserves, which would reduce the depreciation pressure on the yuan. That pressure, plus the drop in the EURJPY FX cross lowered risk appetite globally, causing the weakness in European equities to drag into the US. The 10yr German Bund yield fell to a new low at 0.54%, as did the yields of France, Belgium, and Switzerland.

The S&P 500 (SPX) ended the day down 0.49% with the utilities sector the weakest of the 10 that make up the benchmark index, all of which fell. Utilities, after peaking yesterday, continued their follow through to the downside today, in spite of the continued strength in US Treasuries. Unconfirmed speculation that Ukraine's largest nuclear plant had been shuttered because of a radiation leak contributed to the selling. Tech stocks underperformed as the Nasdaq-100 (NDX) fell by 0.61%.

The December Conference Board consumer confidence index rose to 92.6, slightly below the 93.9 that had been expected. Last month's index reading was revised up to 91.0 from 88.7. The current month's jump was influenced by consumers' feelings on the current economic situation. Home prices according to the S&P/Case Shiller indices saw an increase of 0.76% from the prior month (versus 0.4% expected) and gains 4.5% from a year ago (versus 4.4% expected). Homebuilder stocks outperformed the major indices today, finishing slightly positive.

Tomorrow's Financial Outlook

The first high frequency economic data for the month of December is due out tomorrow morning - the Chicago regional manufacturing index. The index is expected to fall very slightly to 60.0 from 60.8 in the month prior, still indicating very robust strength. Also scheduled to be released are weekly jobless claims and November pending home sales. Bond markets will close at 2pm ET for the New Years holiday although equity and futures markets will remain open for normal trading hours.

The only piece of economic data scheduled for overnight is the final China HSBC manufacturing PMI for December. No change is expected from the preliminary report of 49.5.

There will be no earnings reports tomorrow or on Friday.

Twitter: @Minyanville

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