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Weak Energy Stocks Lead Market Lower


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

Russia's President Putin asked his country's parliament to rescind the approval they gave him on March 1 to use force in Ukraine. Overnight, Pro-Russian rebels in the Ukraine agreed to a one-week ceasefire proposed by the government while all sides negotiated for a peaceful resolution. Russian equity markets were the best performers today. Iraq tensions continued to permeate through global markets. The Dubai Financial Market Index (DMFGI) is down 21.2% this month having fallen 6.68% today.

Bank of England Governor Carney said in a testimony to the UK Treasury that there is still a fair amount of slack in the English economy and real wage growth has been slower than he expected. Accordingly, he did not walk back his comments from June 12 when he said the bank is likely to begin hiking rates before the market expects. Instead he reiterated that policy normalization will occur at a gradual and limited pace, and the final rate will be materially lower than in prior cycles.

Energy stocks, particularly exploration and production stocks, were very weak today after showing signs of technical exhaustion yesterday. The subsector finished -4.00% in today's session. The energy sector of the S&P 500 (INDEXSP:.INX) was the clear worst performer in the index today, down 1.98%. The broader market caught up to the energy weakness as the day went on, retracing all of the gains achieved after the home-sales data in the morning and then falling even further. The S&P 500 finished down 0.64% and achieved a very rare technical feat. On a daily basis, the index made a new high, forming an outside up bar, only to negate the pattern entirely and leave an outside down day. The implication is that further downside is in the cards because the index's upside is fully exhausted.

New-home sales rose 18.6% month-on-month in May to a 504,000 annualized rate. Economists had expected 439,000. The homebuilder durables sector was the top performing section of the S&P 500 today up 0.33%, but most of those gains were given back later in the day as the index fell. Conference Board's consumer confidence index for June rose to 85.2, ahead of the 83.5 expected. The index is now at its highest level since January 2008.

Vertex Pharmaceuticals (NASDAQ:VRTX) soared 41.12% today after reporting positive trial results for its cystic fibrosis treatment regimen. However, the broader biotech universe was mixed today.

Tomorrow's Financial Outlook

The final estimate of first-quarter US GDP will be released tomorrow morning. Because of revisions to April's net exports and a poor government report on services growth, economists have lowered their estimates to -1.8% quarterly annualized growth. The prior government estimates were 0.1% and -1.0%. The other major report scheduled for tomorrow is May durable goods orders; it is expected to show no top-line growth from the month prior. Capital goods orders, which are more relevant to economic growth, are expected to rise 0.5% after excluding defense and large airplane orders.

There are no major economic reports scheduled overnight that could influence futures markets.

Five notable US companies are scheduled to report earnings tomorrow: General Mills (NYSE:GIS), Barnes & Noble (NYSE:BKS), Apollo Education (NASDAQ:APO), Monsanto (NYSE:MON), and Bed Bath & Beyond (NASDAQ:BBBY).

Twitter: @Minyanville

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