China Stimulus and Rising Confidence Boost US Stock Markets
Today's financial recap and tomorrow's financial outlook.
Separately, the Swedish Riksbank cut its main policy rate to zero from 0.25%, economists had expected a cut of 12.5bps, and also lowered the path of future rate policy substantially. The central bank noted high levels of consumer indebtedness and still low levels of inflation as the reasons for the surprise cut. They also did not rule out currency intervention with the Krona and non-standard measures (likely asset purchases).
US markets took the cue from the strength in Asian markets overnight to open the morning higher, despite weaker economic data. The S&P 500 (SPX) opened up 0.47% and grinded steadily higher throughout the rest of the session. Small cap stocks were the real standouts today, the Russell 2000 (RUT) closed up 2.85%. Energy and industrials stocks were the real stand outs, propelled by the expectation for higher inflation in the future due to the substantial drop in gas prices over the past four months. The SPX is currently positive for the month of October after being down as much as 8% at one point.
The Conference Board's October consumer confidence index was one of the contributors to this gain. Lower income households saw an enormous jump in confidence over the last four months as gas prices have fallen. This boosted the overall index up to 94.5, better than the 87.0 expected, and the highest reading since October 2007. On the other hand, September durable goods orders showed the exact opposite optimism. Orders fell 1.3% from the prior month, worse than the +0.5% expected, and capital goods orders (a forward looking indicator) showed the second largest drop of the year - the other was in January.
Facebook (FB) earnings reported after the close were inline with estimates, but not enough to move the needle on the stock price. Advertising revenues grew by 11%, mobile ad revenue by 66% (compared to 64% expected), and total revenues came in at $2.96 billion versus $2.95 billion expected. The stock was mildly down in the after hours. The options market was priced for a move of 7.86%
Tomorrow's Financial Outlook
Tomorrow is the Fed decision. The statement will be released at 2:00pm ET, there is no press conference or economic projections. The hint of action - possibly the end of QE - two weeks ago from St. Louis Fed President Jim Bullard helped arrest the decline in risk assets. It is likely that the Fed reduces its asset purchases to zero, but in order to keep up the optimism in the market, it will have to act dovishly and acknowledge the poor economic data in the third quarter, and the negative effect of the rising US dollar.
Preliminary Japanese industrial production for September is due out overnight. Retail sales announced today showed a very strong, larger-than-expected gain for September. Chinese consumer sentiment and UK mortgage applications are also scheduled to be released.
Fifty nine major US companies are scheduled to report earnings tomorrow. Notables include Hess (HES), Ally Financial (ALLY), Ralph Lauren (RL), Kraft Foods (KRFT), Avis Budget (CAR), Metlife (MET), Visa (V), and Carlyle Group (CG).
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter