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US Stocks Shrug Off Yesterday's Weakness


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

European equities closed the day down more than 0.75% across the board. In the UK, a survey of retail sales in June showed a shocking drop from the prior month, which caused the country's sovereign bonds to post large gains.

After yesterday's deep sell-off late in the day that recorded a number of technical reversal signals, US stocks opened up negative to start the session, but ended up creeping higher throughout the day. Even though sellers appeared near the end of the day, the market was able to post solid gains across the board. Health-care stocks remained strong performers, up 1.08% as a group, and lead the S&P 500 (INDEXSP:.INX). Tech stocks also performed well.

The final estimate of first-quarter GDP showed a quarterly annualized contraction of 2.9%, the third-worst single quarter in the last 50 years. That is down from the prior two estimates of 0.1% and -1.0%. The drop was mainly attributed to a severe downward revision to health-care spending in the quarter as a result of the implementation of the Affordable Care Act. Economists had expected GDP to show a 1.8% contraction. Durable goods orders for May fell 1.0% from the prior month, the expectation was for no change. Once large aircraft orders were removed, orders only fell 0.1%, still below the expected.

The Department of Commerce will now allow shale companies to export an extremely light crude oil called condensate. This benefited two companies in particular, Pioneer Natural Resources (NYSE:PXD) and Enterprise Products Partners (NYSE:EPD). If the plan is fully approved, it would allow US refiners to export oil for the first time in 40 years.

Late in the session the New York Attorney General announced that it was pursuing a securities fraud lawsuit against Barclays (NYSE:BCS). The suit detailed how the bank gave preferential treatment to high-frequency trading firms with its dark-pool business. Barclays runs one of the world's largest dark pools.

Tomorrow's Financial Outlook

With today's final revision to first-quarter GDP showing a severe drop in personal spending, tomorrow's May consumer inflation and personal consumption report will garner even more attention. The personal consumption expenditure inflation gauge is expected to rise 1.8% from a year ago after rising 1.6% in the month prior. Similar price gains were seen in the consumer and producer price indices earlier this month. Personal spending is expected to rise 0.4% month-on-month.

There are no major events scheduled overnight that should affect risk assets. The Bank of England may publish its recommendation for the government's Financial Policy Committee on how to control excessive gains in the country's home prices.

Nike (NYSE:NKE), Lennar Homes (NYSE:LEN), and ConAgra Foods (NYSE:CAG) are all scheduled to report earnings tomorrow. The first two are very important. Nike has large global exposure to consumers and its earnings are a bellwether for economic activity. Lennar is levered to the domestic single-family home market.

Twitter: @Minyanville

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