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Bears Stay in Control for a Second Day


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

US markets continued where they left off yesterday, the S&P 500 (INDEXSP:.INX) almost reaching a decline of 1%, which it has not done in nearly three months. Consumer staples took over the leadership role as it outperformed for a fifth straight day. Energy stocks also outperformed, after trailing the market for several days. This sector had experienced a spate of profit-taking in recent weeks after leading the market higher since May.

May job openings rose to 4.635 million from 4.445 million last month, marking the highest number of openings in seven years However, part of the increase was the result of a drop in hirings, so the increase was not completely positive.

European markets continued to break down today following poor full-year guidance from Air France-KLM (EPA:AF), because the company was unable to repatriate revenues from Venezuela. Italy was a notably weak performer, which is a good gauge of risk appetite in Europe. European bank stocks continue to be weak as investors prepare for further litigation from the US against the region's banks. The latest round of probes include Commerzbank (ETR:CBK) and Deutsche Bank (NYSE:DB).

Alcoa (NYSE:AA) was the first major company to report second quarter earnings, doing so after the close. The company reported EPS of $0.18 that was ahead of the $0.12 expected. Revenues declined by 0.2% from the prior year to $5.84 billion, but that was ahead of the $5.65 billion expected. Alcoa reaffirmed its full year 2014 forecast for global aluminum demand at 7%.

Tomorrow's Financial Outlook

The only event scheduled for tomorrow is the Fed's release of the minutes from its last FOMC meeting. Market participants will be looking to see if the minutes will provide any hints on why the Fed chose to ignore the recent increase in inflation. Additionally, investors and pundits will be looking for any thoughts on the future level of policy rates or an exit plan. The Treasury will sell $21 billion of 10-year notes in the afternoon.

Overnight the biggest catalyst for risk assets is the release of China's consumer and producer price indexes for June. Chinese economic data for the months of May and June has consistently beat expectations and the government has been active on the fiscal stimulus front. The one downside risk for this report is the continued decline in home prices. In June, property prices showed a broad-based decline, whereas they've seen consistent increases for more than two years.

There are no major earnings reports scheduled for tomorrow.

Twitter: @Minyanville

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No positions in stocks mentioned.

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