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US Stocks Markets Post Best Single Day Gain of the Year

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

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US equity markets continued their jaunt higher again today. Since last Wednesday's intraday low the S&P 500 (SPX) has recovered 6.62% of its losses in a clear uptrend that indicates a significant supply/demand imbalance. The benchmark index closed up 1.96% for today's session, the largest single day gain of the year, with 97% of the 499 stocks in the index closing positive. Energy and industrials stocks were the leading sectors even though crude was only a modest 0.63% higher. Positive earnings from United Rentals (URI) and a rebound in airline stocks following a US government plan to limit visitors at five airports from nations where Ebola is present were the contributing factors.

Early this morning Reuters reported that the ECB was preparing to purchase corporate bonds as soon as December in addition to its existing covered, and planned asset-backed security purchases next year. The presumption was that the central bank would need to find other assets to buy because of a lack of supply in its existing plan. Although the ECB would later deny this report, market participants still believed it will be a necessary step in the future.

Existing home sales rose to a 5.17 million annualized rate in September from 5.05 million in the month prior. This was better than the 5.10 million expected by economists. Prices continued to drop, however, with the average selling price falling to $255,500 from $263,800 in the month prior.

Yahoo! (YHOO) traded up following the close after the company reported better-than-expected third-quarter results.Yahoo benefited from growth in mobile advertising revenue and the sale of some of its Alibaba (BABA) shares.

Apple (AAPL) rose 2.7% to $102.47 on the back of its strong fiscal fourth-quarter results reported after the close Monday.

McDonald's (MCD) fell 0.6% to $93.01 after originally as its results were well below Wall Street's expectations. Comparable sales fell 3.3% versus the expected contraction of 3.0% with the US and Europe the root cause of the decline. The company also experienced a foreign exchange headwind on its profits.

Tomorrow's Financial Outlook

Market participants will face a tough decision with tomorrow's September consumer price index (CPI) report. Disinflationary pressures have been strong since the beginning of July and this has caused risk assets to be repriced lower. It is highly likely due to the the slowdown in home price increases and drops in gasoline prices that we may see a second consecutive decline in consumer prices. Additionally, we may see a further mitigation in core prices. Last month core prices showed no change, one of the few times that has occurred in the past decade. The question for investors is whether or not that is a positive because it warrants a response from the monetary authorities, the drop in gasoline prices is a synthetic stimulus for consumers, or that it forecasts further declines in risk assets.

Australia will report third quarter consumer inflation figures tomorrow. It does not report CPI each month like most other countries. Because its economy is tied to commodities such as copper and iron ore mining, its currency will react to the report accordingly, especially because the Reserve Bank of Australia (RBA) will likely need to become involved in its currency market. The real fireworks for global economics won't show up until Thursday when preliminary manufacturing data for October will be released for the eurozone.

Thirty seven major US companies are scheduled to report earnings tomorrow. Notables include Boeing (BA), Abbott Labs (ABT), Dow Chemical (DOW), General Dynamics (GD), Stanley Black & Decker (SWK), Biogen (BIIB), US Bancorp (USB), Norfolk Southern (NSU), AT&T (T), Tractor Supply (TSCO), Yelp (YELP), and Skechers (SKX). 

Twitter: @Minyanville

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No positions in stocks mentioned.

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