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T3's Take 3: Markets Shake Off Tragedy in Paris


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


Paris Tragedy

On Friday, Paris, France was gripped by terrorist attacks by ISIS that claimed the lives of over 100 people, which set off a firestorm of geopolitical concerns.

However, European equity markets mostly took the news in stride.

Following an initial dip, European stocks actually firmed up. The French CAC 40 index finished the day down just 0.1%, while the German DAX rose 0.1%.

Bond yields fell as traders fled for safety. The 10-year German Bund yeld fell 2.8 bps to 0.530%, while the French 10-year dropped 2.2 bps to 0.852%. 

France bombed ISIS targets in Syria, which drove crude oil prices back above $42 a barrel. Gold rose fractionally, having given up most of its gains by the end of the trading day.

US Markets Rise

In premarket trade, S&P 500 futures went negative after the disappointing November Empire Manufacturing report. 

After a middling open, stocks gradually crawled up in an impressive rally, with the S&P 500 finishing up 1.5% at 2053.18.

Energy stocks led the charge up, with the Energy Select SPDR ETF (XLE) rising 3.3% on the back of the aforementioned spike in oil.

Basic materials, consumer staples, and utilities stocks also performed well. Retail stocks won back some of the huge losses the sector posted on Friday.

However, because of the Paris terrorist attacks, airlines and other travel-related stocks did not participate in the rally.

On Friday, the VIX curve became inverted, implying that a great deal of fear was already priced into the market and that we may have been oversold.

Today, the VIX fell 9.8% to $18.11.

Earnings Season

On Friday, FactSet Research Systems (FDS) announced its latest statistics for Q3 earnings season.

With 90% of the S&P 500 having reported, index earnings have declined 1.8%. However, this is actually better than the 5.1% declined assumed by analysts on September 30.

On the negative side, just 45% of companies have beaten sales estimates, and 5 of the S&P's 10 sectors show declining revenues.

This marks the third straight quarter of declining earnings, the first time that's happened since 2009.

Tuesday's Financial Outlook

The big piece of news tomorrow will be the CPI report, which comes out at 8:30 a.m ET. It could have a big impact on traders' perception of what the Fed may do in December. Industrial production, capacity utilization, and manufacturing production numbers will also be released.

Overseas, British CPI and the German ZEW Economic Sentiment Survey will be released.

Retailers Dick's Sporting Goods (DKS), Home Depot (HD), and Wal-Mart (WMT) report earnings tomorrow.

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