US equity futures were lower overnight on weaker Chinese and German manufacturing data, but they steadily rallied back during the day despite weak economic data in the US. Ever since Caterpillar (CAT) found a bottom yesterday morning after reporting less-than-stellar earnings, the broader S&P 500 has rallied back 29 points or close to 2%. The S&P 500 gained 15 points out of the gate and more or less held that area throughout the day. During the early afternoon, the official Twitter account for the Associated Press was hacked and false reports of explosions at the White House sent the S&P 500 to unchanged on the day for a few minutes before rallying back to its prior level.
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The three economic reports in the US showed manufacturing data continuing to weaken while new home sales continued their modest uptrend. Markit preliminary US PMI fell to 52.0 from last month's 54.6, well below the 53.9 consensus. The drop was due to significant drops in new orders, employment, and output. Similarly, the Richmond regional manufacturing index dropped to -6 from 3 the month prior on drops in new orders, employment, and capacity utilization. March new home sales rose 1.5% month-over-month to an annualized rate of 417,000, up from 411,000 in February.
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Global economic data was not great. The eurozone composite PMI was unchanged month-to-month at a reading of 46.5, but more worrisome was the significant drop in German manufacturing PMI to 47.9 from February's 49. Similarly, Chinese flash manufacturing PMI fell to 50.5 in April from 51.6 the month prior. The Chinese Shanghai Composite Index fell 2.57% in overnight trading.
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After the close, Apple (AAPL) reported earnings. For the EPS and revenue numbers, both beat, but forward revenue guidance for the 2Q left much to be desired. However, the company increased its buyback plan by $50 billion to $60 billion, leaving $59 billion yet unpurchased, and increased its dividend by 15%. To fund such a large buyback and dividend plan, the company will issue debt. Apple received a AA+ reading from S&P.
Tomorrow's Financial Outlook
Tomorrow is an equally busy day in terms of both economic data and earnings reports. In the morning, we have March durable goods orders and capital goods orders. Durable goods orders will show a large headline number due to a decline in Boeing's (BA) aircraft shipments, but the more important ex transports number is expected to show a 0.6% gain. Given the fact that manufacturing surveys for March were generally weaker, we would expect this number to miss to the downside.
On the US earnings front, it will again be a busy day with more than 20 companies reporting. Notable reports include Virgin Media (VMED), Hess (HES), Ford (F), Sprint (S), Boeing, Qualcomm (QCOM), Zynga (ZNGA), and Fusion-io (FIO).
On the calendar for global economic data is Australian consumer inflation and German economic expectations via the IFO Institute. Australian consumer inflation is expected to increase annually to 2.4% from 2.3%.