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The S&P 500 Ends a Volatile Session Near Unchanged


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

Asian markets were mostly higher overnight: China sold off modestly and Japan rallied. There were news reports last night that China's central bank is considering a cut of its reserve ratio, but Chinese mobile stocks such as China Mobile (NYSE:CHL) and Tencent Holdings (HKG:0700) struggled. Industrial & Commercial Bank of China (HKG:1398) reported its 2013 earnings this morning. The company saw an uptick in loan write-downs and non-performing loans in the past year, but its increase in loan reserves fell short of analyst expectations. The smaller increase in loan reserves implies that the company does not expect its bad loans to rise as much in the future as investors think.

US stocks had a very volatile day. Following last night's post-market sell-off, equities continued to sell off very sharply in the market's opening minutes. S&P 500 (INDEXSP:.INX) futures lost as much as 14 points in the first 10 minutes. However, buyers showed up as biotech stocks traded down 3% as a group and then reversed strongly to close up 0.90%. Financial stocks were a notable laggard in today's trading, losing as intermediate interest rates declined. The S&P 500 ended down 0.19% for the session and the small-cap Russell 2000 (INDEXRUSSELL:RUT) continued to underperform.

The third and final release of US fourth-quarter GDP rose marginally to a 2.6% quarterly annualized rate from the prior estimate of 2.4%. An increase in personal consumption in the quarter was the main driver of the rise from the prior estimate. Pending home sales declined 10.2% year-over-year, slightly worse than the -9.2% that had been expected.

The Treasury sold $29 billion of 7-year notes at a high yield of 2.258%. Direct bidders -- those who bid directly with the Treasury for their house accounts -- took 32.6% of the auction, eclipsing the prior record of 24.6% by a wide margin. Separately, the 30-year yield touched 3.49% today, the lowest yield since July 2013.

Tomorrow's Financial Outlook

Tomorrow morning, February US personal income and spending will be released. Additionally, the closely watched PCE deflator will be released; it measures the change in consumer spending prices. Personal consumption is expected to increase 0.3% from the prior month after growing 0.4% in January. The deflator is forecast to decline to a year-over-year rate of 0.9% from 1.2% in January, similar to the decline that was seen in producer and consumer prices in that month.

Japan will release its employment, consumer price index, and retail sales reports for February overnight. National consumer prices are expected to grow 1.5% year-over-year after rising 1.4% in January. Also scheduled for release tomorrow is the final estimate of the UK's GDP in the fourth quarter.

There are no major earnings reports scheduled to be released in the US tomorrow.

Twitter: @Minyanville

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