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Further Energy Weakness Drags Down Stocks

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

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US markets were lower in the pre-market as lower crude oil and a further revision lower in Japan's third quarter growth. The S&P 500 (SPX) futures were down about seven points near the time the market opened. A sudden drop lower of nine points after noon sent the major indices into a tailspin. Market participants were concerned that investors were purging their portfolios of high yielding midstream master-limited-partnerships (MLPs) that have been up to this point untouched by the drop in energy prices. Some of the MLP's fell by more than 8%, which spread tension throughout the market.

China's trade balance, released overnight, showed a dropoff in both exports and imports, which prompted sharp losses in most industrial metals. However, Chinese equities, specifically the Shanghai Composite (SHCOMP), continued to rally. Over the last 12 sessions, the SHCOMP is up 23% after tacking on another 2.81% of gains overnight. Today, the calls by banks to ease the domestic loan-to-deposit ratio intensified. China has one of the highest ratios in the world.

The SPX finished the day down 0.73%. The energy sector was a clear laggard, dropping 3.9%. The small-cap Russell 2000 (RUT) underperformed on a risk-adjusted basis, dropping 1.28% in today's session. Treasuries rallied strongly with the 10-year yield declining by five basis points to 2.26%.

Apple (AAPL) fell to $111.62 intraday, nearly touching last Monday's $111.27 mini-flash crash low. The stock recovered a bit into the close, finishing at $112.40, down 2.3%.

Twitter (TWTR) took a 5.7% hit today as high-beta tech names were sold aggressively. Peers LinkedIn (LNKD) and Yelp (YELP) also suffered, though Facebook (FB) managed to finish in the green.

Tomorrow's Financial Outlook

The October monthly JOLTs job openings will be released tomorrow, in addition to the wholesale inventories for that month. Job openings are expected to rise to 4.795 million for the month, near their highest level in a decade. Inventories, which have been moderate in the last few months, are expected to gain 0.2%. The Treasury will begin its series of three bond auctions for the week, starting with a 3-year issue. Separately, two major energy conferences will begin tomorrow in  New Orleans and New York.

Germany will release its trade balance data for October in the early morning. Both imports and exports are expected to drop 1.7% for the month after showing strong gains in September. UK industrial production will also be reported with modest 0.2% gains expected.

Burlington Stores (BURT), Autozone (AZO), and HD Supply Holdings (HDS) are the only major companies with earnings reports scheduled for tomorrow.

Twitter: @Minyanville

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No positions in stocks mentioned.

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