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US Stocks Finish Higher Despite Early Weakness in Financials


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

Two of the world's major banking centers, the UK and Japanese, were closed today for holidays, the latter due to the string of Japanese holidays that together create Golden Week. As such, activity was muted across all markets. The final private estimate of Chinese manufacturing activity in April declined to 48.1 from the initial estimate of 48.3, the fourth straight month below a neutral reading of 50.

Last Friday, JPMorgan (NYSE:JPM) disclosed in its 10-Q that it expected revenue to fall by 20% in the second quarter from the quarter a year ago. The company noted a challenging environment and lower client activity levels. Financial stocks were under pressure today, particularly investment banks, which caused sharp overall weakness in stocks at the open. However, the major indices recovered by the late morning and the S&P 500 (INDEXSP:.INX) ended the day up 0.19%. The benchmark index was led by gains from utilities, health care, and energy stocks.

Housing stocks came under pressure with news from the Ira Sohn Investment Conference that DoubleLine Capital's Jeff Gundlach recommendation to short the sector due to single-family home weakness.

The April index of services companies activity rebounded for a second straight month after seven prior months of declining activity. The new orders and business activity components showed explosive growth in the month, but employment showed a noted drop, which stands at odds with last Friday's government payrolls report.

Tomorrow's Financial Outlook

The only major economic report scheduled for tomorrow is the March trade balance. Economists expect the US deficit to narrow to $40.2 billion from $42.3 billion in February. Federal Reserve Governor Jeremy Stein, a hawk who will step down at the end of this month, will give a speech in New York after the market close.

The most important event for risk assets overnight is the Reserve Bank of Australia's rate decision. Although CPI inflation continued to rise in the first quarter, the trimmed mean measure, which the central bank watches closely, was unchanged at 2.6%. This should give the RBA cover from having to turn more hawkish. It will likely continue to note the high level of the Australian dollar, however. UK, eurozone, and Canadian services PMI's are all scheduled to be reported.

Fifty-one major US companies are scheduled to report earnings tomorrow. Notable reports include Office Depot (NYSE:ODP), Emerson Electric (NYSE:EMR), Goodrich Petroleum (NYSE:GDP), DirecTV (NASDAQ:DTV), Nu Skin Enterprises (NYSE:NUS), Discovery Communications (NASDAQ:DISCA), Mosaic (NYSE:MOS), Disney (NYSE:DIS), Whole Foods (NASDAQ:WFM), Activision Blizzard (NASDAQ:ATVI), Electronic Arts (NASDAQ:EA), Marathon Oil (NYSE:MRO), First Solar (NASDAQ:FSLR), and Groupon (NASDAQ:GRPN).

Twitter: @Minyanville

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No positions in stocks mentioned.

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