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Energy Leads Stocks Higher Following Supply Cut


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

US equities shook off yesterday's weakness, and not only did they retrace all of the losses, but they exceeded the prior highs. This allayed any fears, for the moment, that the retracement from the 10% correction in the S&P 500 (SPX) had completed. The 61.8% retrace from the prior high at 1943 was hurdled again. The benchmark index was led by industrial and energy stocks in today's rally and ended the day up 1.23%. At its highest point today it had been up 1.80%.

Overnight, preliminary October manufacturing PMI's for China and the eurozone showed a reduced contraction in activity, which was viewed as an incremental positive because both countries' governments are already attempting to stimulate the economy. The HSBC gauge for China manufacturing rose to 50.4 from 50.2 in the month prior (the same as the expected). Eurozone manufacturing remained in expansionary territory at 50.7 (versus last month's 50.3) and the central engine of growth, Germany, which had been a cause for concern to market participants lately, jumped up to 51.8 from 49.9.

A news report from various media outlets late in the day indicated that a doctor that had previously treated Ebola patients in Africa, and a resident of New York City, had been rushed to a hospital showing symptoms of the disease. This lopped off about 12 points from the SPX.

Saudi Arabia announced that it had cut oil production in September by 5% to 9.36 million barrels per day and sees crude demand increasing in the fourth quarter for winter purchases. Other OPEC members have called for a further cut of 500,000 barrels by the coalition. West-Texas intermediate crude oil closed up by 1.89% and Brent crude by 2.53%.

Caterpillar (CAT) reported earnings in the pre-market and they were much better than expected. Recently, dealer sales figures had showed a concerning drop and estimates for the quarter had been lowered dramatically. Those concerns proved to  be unfounded as the stock shot up in today's trading and led the industrial complex. Caterpillar shares closed up 4.92%.

Tomorrow's Financial Outlook

The only piece of data scheduled to be released tomorrow in the US is September new home sales. Existing home sales for the same month, released this past Wednesday, exceeded expectations. The sentiments top of mind for investors will be the results from Europe's bank tests, a confirmed case of Ebola, and any earnings released in the pre-market.

The advance third quarter GDP report from UK will be released tomorrow morning. Growth is expected to moderate to a 0.7% quarterly rate and down to 3.0% annual. Inflation has already come in well below targets. German GfK consumer confidence for November and China property prices are also due out overnight. Investors will be looking for any signs of bottoming in the home price declines in China because the government has loosened mortgage regulations in the past four months.

All of tomorrow's earnings reports will be released in the pre-market. Notable companies scheduled to report include Cabot Oil & Gas (COG), Colgate-Palmolive (CL), Procter & Gamble (PG), Moody's (MCO), Ford (F), UPS (UPS), Bristol-Myers (BMY), and State Street (STT).

Twitter: @Minyanville

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