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US Stocks Continue to Rally; Economic Growth in Europe Falls Short


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

Early this morning, the preliminary report of eurozone second quarter GDP was a stinker. Growth was below expectations, and in some cases negative, for the three largest countries in the region: Italy, France, and Germany. European sovereign bonds rallied with the 10-year German Bund yield falling below 1% for the first time ever and beginning to approach the Swiss and Japanese rates near 0.5%. Most European equities rallied early this morning on news from Russian President Vladimir Putin's press conference in Yalta that his country will do all it can to stop the conflict in Ukraine.

Crude oil, both WTi and Brent, remained under pressure throughout the day. With growth in Germany showing a contraction for the second quarter, who is Russia's second largest trading partner, some of the negative price movement today was certainly attributed to a lack of demand. Additionally, current Iraqi Prime Minister Al-Maliki announced that he was stepping down according to multiple news reports, which would reduce potential supply disruptions in the near-term.

The S&P 500 (SPX) remained higher, thanks to the further diminishment of geopolitical risk in both Iraq and Ukraine. The 1951-1955 zone proved to still be a stiff level of resistance. Health care led today's session with utilities closely behind, thanks to a drop in interest rates. Jobless claims rose to 311,000 last week. The past six weeks of claims have been erratic, as is normal during this part of the year.

Tomorrow's Financial Outlook

Tomorrow will be the busiest day of the week for economic reports. On tap are the producer price index for July, TIC flows for June, the August NY manufacturing survey, industrial production from July, and preliminary August consumer confidence. Inputs prices are expected to slow further in July, forecasting a continued drop in consumer inflation for the month. On the other hand, both consumer confidence and industrial production are expected to rise.

Early tomorrow morning, the UK will be the last major developed country to report its economic growth for the second quarter. Thus far, the results have been very lackluster. Growth is expected to rise at a quarterly rate of 0.8%, the same as the quarter prior.

The only major earnings report scheduled for tomorrow is Estee Lauder (EL).

Twitter: @Minyanville

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