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US Markets Build on Tuesday Afternoon's Rally


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

China's GDP rose a little more than expected in the first quarter, which helped buoy global risk assets overnight. Annual growth declined to 7.4% from 7.7% in the quarter prior, better than the 7.3% expected. Japanese markets rallied strongly in response to comments from Japan's Finance Minister Taro Aso that the Government Pension Investment Fund (GPIF) may adjust its investment process as early as June. Previously, the government has said that the pension fund will increase its investment in equities and decrease its government bond holdings due to their low returns. The Nikkei 225 (INDEXNIKKEI:NI225) rose 3.03% in its overnight session.

The S&P 500 (INDEXSP:.INX) had another erratic session but ended up continuing to rally after yesterday afternoon's reversal. The benchmark index closed up 1.05%. Money center banks were a notable laggard due to a worse-than-expected earnings report from Bank of America (NYSE:BAC). Materials, industrials, and energy stocks all led today, partly due to the positive industrial production report. Natural gas stocks have been performing very strongly in the past week.

Janet Yellen, in her first public speech on monetary policy since taking over at the Federal Reserve as chairwoman, said that the Fed would likely keep rates lower than normal for an extended period. The Fed's Beige Book of economic activity over the past six weeks had a more upbeat tone as activity increased in most regions. Residential real-estate inventories remained low as home prices rose.

March housing starts only rose to a 946,000 annual rate from 920,000 in the month prior. Economists had been expecting 970,000. The more forward-looking building permits figure declined to 990,000 versus 1.010 million expected. Industrial production showed solid improvement after what was likely weather-related weakness. Production rose 0.7% in March versus 0.5% expected, and the prior month's growth was revised up to 1.2% from 0.6%.

Bank of America fell 1.83% after reporting its first-quarter results. The company reported better-than-expected net revenues and an improvement in credit quality, but its profitability was hurt by $6 billion in legal expenses, which was larger than expected.

Yahoo! (NASDAQ:YHOO) rose 5.67% after beating analysts' earnings and revenue expectations. Investors were also excited about better-than-expected growth at Chinese Internet company Alibaba, in which Yahoo owns a significant investment.

Tomorrow's Financial Outlook

There are only two economic reports scheduled for tomorrow: weekly jobless claims and the April Philadelphia regional manufacturing index. The former is expected to modestly increase to 311,000, back toward its four-week average of 316,250, from 300,000 last week. The manufacturing index, the second of its kind for April, is expected to rise to 10.0 from 9.0 last month. US bond markets will close at 2:00 p.m. EDT before the Good Friday holiday.

The only notable global economic reports scheduled for tomorrow are Japan's consumer confidence index and Canada's consumer price index for March. The Japanese Ministry of Finance will release Japanese investors' purchases of foreign bonds and stocks over the last week overnight.

The main event tomorrow will be earnings. Twenty-nine major US companies are scheduled to report, and all are significant. Notable reports include Honeywell (NYSE:HON), General Electric (NYSE:GE), Schlumberger (NYSE:SLB), Blackstone (NYSE:BX), BlackRock (NYSE:BLK), Fifth Third Bancorp (NASDAQ:FITB), Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), Pepsi (NYSE:PEP), Chipotle (NYSE:CMG), Philip Morris (NYSE:PM), and Advanced Micro Devices (NYSE:AMD).

Twitter: @Minyanville

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