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Negligible Changes to FOMC Statement Leads to Little Volatility


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

The avalanche of economic data ruled today's trading. The April ADP private payrolls report showed a net gain of 220,000 jobs, better than the 210,000 expected, and the prior month's payrolls were revised higher to 209,000 from the initial 191,000 report. The advance estimate of first-quarter GDP rose at a quarterly annualized rate of 0.1%, worse than the 1.2% economist expectation. The drop was attributed to a substantial drop in exports, business fixed investment, and a small decline in inventories from the prior quarter. However, the poor consumption across the board was balanced out by increases in utilities and health care spending that hasn't been seen in more than two decades. The increases were very likely from weather-related electric and heating costs and the implementation of the Affordable Care Act.

The Fed cut its monthly asset purchases by $10 billion to $45 billion, as had been widely expected. In its post-meeting statement, it noted that economic activity had picked up recently after slowing sharply in recent months due to adverse winter weather. It also noted an increase in household consumption, but a drop in business fixed investment. Lastly, it continued to see reducing its monthly asset purchases further in the coming months if the economic outlook remained relatively unchanged.

The S&P 500 (INDEXSP:.INX) bounced around unchanged for much of the day, but it rallied slowly and steadily to close near its highs of the day, up 0.30% .Energy stocks lagged as crude oil declined by 1.16%, breaking a multimonth trendline of support. Department of Energy crude oil inventories rose by 1.7 million barrels after last night's API data showed a build of 3 million barrels. The regional Chicago purchasing managers index rose to 63.0 from 55.6 last month, one of the highest single-month readings in the past decade.

Tomorrow's Financial Outlook

Tomorrow will continue to be busy on the economic data front: weekly jobless claims, March personal income and spending, the April national ISM manufacturing index, and auto sales. Personal income is expected to rise 0.4% month-on-month, while spending is expected to increase 0.6%. The ISM manufacturing index is expected to rise to 54.2 from 53.7 last month. Auto sales are expected to show a similar amount of total sales of a 16.2 million annual rate after 16.33 million last month.

Tonight the official Chinese manufacturing PMI will be released. The Markit preliminary gauge of small manufacturers released a week ago showed slight growth to 48.3 from 48.0 in March, its fourth straight month of contraction. Economists are expecting the official gauge to show a similar increase to 50.5 from 50.3 in the month prior. The UK manufacturing gauge for April is also scheduled to be released.

Seventy-seven major US companies are scheduled to report earnings tomorrow, making it the busiest day of the week. Notable reports include ExxonMobil (NYSE:XOM), ConocoPhillips (NYSE:COP), Beazer Homes (NYSE:BZH), MasterCard (NYSE:MA), T-Mobile (NYSE:TMUS), Kellogg (NYSE:K), Kraft Foods (NASDAQ:KRFT), LinkedIn (NYSE:LNKD), and Viacom (NASDAQ:VIA).

Twitter: @Minyanville

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