Commodities Take It On The Chin

Markets are weak this morning after being higher for the last 4 days.  The big dislocation is in the commodities markets, where prices are down sharply today.  This isn't due to a gain in the dollar index either, as the dollar is roughly flat.  I'm not sure the exact catalyst, other than concerns about global growth.

Oil prices are down to $90.75.  Gold prices are taking it on the chin and all the way down to $1507.  Silver prices are down 4% and copper prices are weak as well.  Ag prices look like they are bucking the weakness so far.

Economic news this morning wasn't great either.  March retail sales declined -0.4% vs. expectations for a flat reading.  And the Univ. of Mich consumer survey came in below expectations at 72.3 from 78.6 last month. 

Bank earnings this morning were mixed.  JPMorgan and Wells Fargo both reported results that beat EPS estimates but revenues were a bit light.  And net interest margins were nothing to write home about.  The stocks are both modestly lower so far.

Among the sector ETFs, energy and materials are by far the weakest sectors while defensive utilities are actually higher on the day. 

Asian markets were mostly lower overnight, led by a -1.6% decline in India after Infosys (INFY) lowered guidance.  Shares of INFY in the US are down 20% this morning-- ouch.  Singapore reported GDP decline -0.6% vs. +0.5% consensus.

European markets are also lower today.  In Spain, the Catalonian minister said it is impossible to implement the 5 billion euro cuts required to reach the 2013 deficit target.

Bond yields are lower today with the 10-year Treasury falling back to 1.73%.

The volatility index is up 6.5% back to the 13 level, but we could be in store for another trip up to the 15 level.

Trading comment: After the strong multi-day runup a pullback in the market was certainly in order.  The news from the banks was not horrible, and actually Wells made some positive comments about the housing market.  Commodities are getting crushed, but I haven't seen any specific news that would justify the sharp selling, so it could be technical in nature.  Earnings season heats up next week, so we should hear from more companies about their outlooks.  But so far my guess is this is just another mild pullback that dip buyers will look to take advantage of before long.

KAM Advisors has long positions in JPM, WFC