Investors Prepare for Thursday's ECB Decision
Today's financial recap and tomorrow's financial outlook.
The price action was generally noisy across most assets. The S&P 500 (SPX) opened 10 points higher, only to decline 25 points in the next 90 minutes, and finally close up by 0.11%. The back and forth left a technical "Doji candle" which usually indicates market participants are indecisive about where prices may trend next. The early selloff was led by weakness in the financial sector following earnings from Morgan Stanley (MS) that below expectations. The afternoon rally was led by industrials, which appeared to be shaking off the pronounced weakness in crude oil and growth forecast reductions by the IMF early this morning.
West-Texas intermediate (WTi) crude oil was very weak today, dropping 5%, although Brent crude did not react as negatively. Today's expiration of the February NYMEX futures contract was cited as a reason for the weakness. In energy news, Baker Hughes (BHI) announced in its earnings conference call that it will cut 7,000 jobs and 20% of capex spending (about $400 million) in the first quarter. Additionally, Nigeria said that it is balancing its 2015 budget with the expectation that oil remains at or below $50 a barrel.
January home builder and realtor confidence fell slightly for the month of January. The NAHB's index dropped to a reading of 57 from 58 in December, which was below the 58 expected. The decline was due to lower expected sales of single family homes in the future.
Tomorrow's Financial Outlook
Tomorrow will more than likely be another set up day for the ECB's decision on Thursday. On the US economic front, December housing starts and permits will be reported in the morning. Starts are expected to expand to a 1.040 million annual pace, up from 1.028 million in the month prior. Permits are forecast to rise by a similar amount and shake off any weather-induced project halts.
Overnight, New Zealand will report its fourth quarter consumer price index. Today's milk auction saw a substantial increase, although the Kiwi (NZD) fell versus other major currencies. Scheduled for release tomorrow morning is various UK employment data and the minutes of the Bank of England's latest monetary policy meeting. Recently, the central bank has become decidedly less hawkish as economic activity has slowed. However, two of its members have continued to dissent and call for an imminent increase in its policy rate. The UK interest rate market now expects that first hike to come well into 2016, and a few short months ago it was already expected to have happened.
The pace of earnings reports accelerates tomorrow. UnitedHealth (UNH), Fifth Third Bancorp (FITB), US Bancorp (USB), F5 Networks (FFIV), American Express (AXP), Xilinx (XLNX), Sandisk (SNDK), United Rentals (URI), eBay (EBAY), Discover Financial (DFS).
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