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Lower Crude Prices Continue to Weigh on Global Markets

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

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Volatility remained very high for the fourth straight day. The S&P 500 (SPX) future traded in a 30 point range during today's session, which was similar to the range from the prior five days. Overnight and early into the session, the US equity market was able to sustain as much as a 1.3% rally, but as has been common the past few days, all of those gains were given up by the end of the trading day. The SPX only recorded a gain of 0.16%. The industrials and utilities sector remained strong with energy stocks continuing to experience weakness as a persistently lower price of crude oil began to be priced into company fundamentals by market participants.

Total trading volume in today's session S&P 500 future eclipsed the total open interest for a fourth day, an extremely rare occurrence, and indicative of uncertainty by market participants on future prices. Equally, the S&P Volatility Index (VIX) remained elevated because investors remained hesitant that the snapback rally would. Additionally, the VIX futures curve remained in backwardation, with short-term protection being more expensive than those in the future.

The US bond market opened today after being closed on Monday. High yield spreads widened by 20bps and are now at their worst levels since November of 2012. Crude oil was especially hard hit today, which was a drag on the broader equity market. West-Texas and Brent crude both fell more than 4% today, which is the equivalent of almost four standard deviations. The 4.85% drop for Brent crude at the end of pit trading was the largest single day loss in the last three years. Most market participants are concerned that OPEC has chosen to lower prices instead of cutting productions now that new supply is coming onto the market from the US and other countries.

After the close, semiconductor giant Intel (INTC) reported third-quarter earnings and revenues that exceeded consensus estimates. Its fourth-quarter revenue guidance was also above Wall Street's expectations. The stock was up modestly and pushed up NASDAQ futures a bit in extended trading. Many investors were concerned that Intel's guidance would be poor after the warning from MicroChip Tech (MCHP) last week.

Railroad company CSX (CSX) also beat earnings expectations after the close. The company also said it expects double-digit earnings growth in 2015.

Tomorrow's Financial Outlook

Tomorrow's agenda is filled with important economic data releases, even though markets have appeared to ignore it over the past few weeks. Advance retail sales have typically been the third most volatile data release for markets. Tomorrow morning the September report will be released with total sales expected to decline by 0.1% for the month, mostly due to a decline in gasoline prices. The average unleaded gallon of gasoline fell by 10 cents during the month of September, which lowers total sales. Additionally, auto sales also declined from the prior month. After excluding those two categories, sales are expected to rise by 0.4% for the month. The producer price index for September and the Fed's Beige Book will also be released.

Overnight China will release consumer and producer price data for September. Consumer prices are expected to decline to a 1.7% annual rate from 2.0% in the month prior due to falling gas prices. The UK will release employment data. ECB President Mario Draghi is scheduled to speak twice tomorrow in two cultural events and comments on monetary policy are not highly expected.

Earnings reports will start to pick up tomorrow. Charles Schwab (SCHW), Keycorp (KEY), Blackrock (BLK), Bank of America (BAC), St Jude Medical (STJ), Netflix (NFLX), American Express (AXP), United Rentals (URI), eBay (EBAY), and Las Vegas Sands (LVS).

Twitter: @Minyanville

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No positions in stocks mentioned.

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