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Financial Stocks Lead the Market, Despite Weak Manufacturing Report


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

Japanese industrial production showed a sizable decline in February. The preliminary estimate of activity declined 2.3% month-on-month, which was worse than the +0.3% estimate. The Japanese government will unveil its 8% sales tax increase tomorrow. Chinese financial stocks continued to rally as the last major bank in the country -- China Construction Bank (HKG:0939) -- reported earnings, beating estimates for loan and margin growth on a year-on-year basis. 

Fed Chair Janet Yellen gave the keynote speech today at the National Interagency Community Reinvestment Conference in Chicago. US equity markets reacted positively to the headlines that Yellen saw the need for extraordinary support for some time due to a persistently weak economy and that the central bank was committed to its 2% inflation goal.

The regional Chicago purchasing manager index, primarily related to auto manufacturers, showed a surprise decline to 55.9 in March from last month's 59.8, which was also the economist estimate. Slowdowns were seen in new order growth, order backlogs, and employment components. The earlier Milwaukee ISM report -- which largely covers consumer-related manufacturers -- showed a sizable bounce-back in activity after a deep slowdown in the January and February months.

S&P 500 (INDEXSP:.INX) futures were higher in the pre-market and rallied sharply as the market opened. The benchmark index closed the session up 0.79% to 1872 34. Financial, health care, and tech stocks were today's leaders. Bank stocks in particular received a bit of good news from a recent Fed report that showed a surprisingly large jump in consumer and industrial loans this year.

AT&T (NYSE:T) announced a buyback of 300 million of its shares, equivalent to about $10.5 billion. The company's stock price bounced by as much as 2% in the opening moments of the session, but ended the session only slightly positive.

Tomorrow's Financial Outlook

Tomorrow morning the national ISM manufacturing index will be released for March. Economists are expecting the index to show a slight increase to 54.0 from 53.2 in the month prior. Also scheduled to be released is February construction spending, the results of which will play a significant role in determining first-quarter GDP growth. The final report of the day is March vehicle sales. If today's Chicago PMI is any indication, the report will be below expectations of 15.80 million sales after 15.27 million in February.

It will be a busy night across the globe as there are two major central banks making rate decisions and two manufacturing PMIs due out. The Reserve Bank of Australia, which has turned more neutral in its policy over the last two months, and the Reserve Bank of India will announce decisions before 1:30 a.m. EDT. The official Chinese manufacturing PMI for March is scheduled to be released. The private survey released by Markit last week showed a surprise decline to 48.1 versus 48.5 expected and 48.7 in the month prior.

Lastly, Germany will report employment numbers for March.

The only notable earnings report scheduled for tomorrow is from Apollo Education Group (NASDAQ:APOL).

Twitter: @Minyanville

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