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Oil Weakness, and When it Stops, Continues to Be a Key Talking Point

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

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US markets experienced some moderate selling today after an almost uninterrupted 12 day rally. The S&P 500 (SPX) lost as much as 0.75% in early trading. The main catalyst was weaker oil prices, which dropped another 3% overnight although there was no apparent catalyst for the drop other than yesterday's Saudi price cut and higher-than-expected production from Alaska. The price bounced later in the day, recouping about half of its overnight losses. Markets in Asia were calm as investors await the launch of the new Shanghai-HK Connect program and other initiatives that will expand the ability for foreign investors to invest in Chinese markets.

For the second day in a row energy stocks were the weakest performing equity sector in the US. The SPX ended up closing the day down 0.28%. The utilities sector showed a rare bout of weakness following a number of analyst downgrades before the market opened. It was down 0.59%. Treasury yields were initially lower, but gave up those gains as the day progressed. The 10-year yield dropped as much as four basis points before closing down a little less than one.

Net exports in the US for the month of September fell by $3 billion from -$40 billion in the month prior - economists had been expecting no change. Following weaker construction and personal spending, and weaker factory orders, real third quarter GDP should be revised down by about 0.7% from its previously reported 0.7% figure.

Tomorrow's Financial Outlook

The results of today's midterm elections should be finalized at some time this evening. The last results are expected at 1:00am ET from Alaska. Market participants are expecting Republicans to gain a net six seats in the Senate and retain their majority in the House. Anything less would be considered a disappointment for the markets. The main economic event tomorrow will be the ADP private payrolls change. Economists are expecting a net growth of 220K after 213K in the month prior, although market expectations are much higher. Also scheduled for release is the ISM non-manufacturing index.

A number of important economic data is out overnight. This includes services PMI reports from CHina, the UK, and Eurozone. Additionally, Switzerland will report its consumer price index. Today the EURCHF FX cross dropped very close to the 1.20 floor that the Swiss National Bank has pledged to protect, but has not had the need to in the last two and a half years. Lastly, Bank of Japan Governor Kuroda will speak in Tokyo.

Earnings remain active tomorrow with 62 companies reporting again. Notables include Time Warner (TWX), Chesapeake Energy (CHK), Actavis plc (ACT), Duke Energy (DUKW), Qualcomm (QCOM), CBS (CBS), Whole Foods Market (WFM), Prudential Financial (PRU), Continental Resources (CLR), Tesla Motors (TSLA), Solarcity (SCTY), News Corp (NWSA), Zillow (Z).

Twitter: @Minyanville

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No positions in stocks mentioned.

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