Profit Taking and Slowing Growth

Global markets are lower in early trading on the heels of some weaker economic data in both Asia and Europe.  Asian markets were lower overnight after China's HSBC manuf. PMI came in at 47.8 which still signals contraction.  China's stock index fell -2.1% to its lowest levels since Feb. 2009, not a very good sign.

In Europe, markets are also lower after manuf. PMI readings in several countries point to slower growth.  France had a disappointing reading (42.6) while the overall Eurozone PMI fell to 46.0 vs. expectations of 47.4.  Investors may cheer the stabilization in bond yields for peripheral Europe, but all of this belt tightening and austerity measures are only going to continue to slow growth without some pro growth measures.

In corporate news, Norfolk Southern (NSC) lowered their Q3 earnings outlook due to slumping demand and lower revenues from fuel costs.  This news is hitting transportation stocks.  NSC is one of the first high profile companies to warn about Q3 earnings, but as we get closer to the end of the quarter we could hear from more companies.

The dollar is higher vs. the euro today which is weighing on commodities.  Oil prices are weaker near $91.85 while gold prices are also down a bit to $1766.

The 10-year yield is easing back further to 1.75%.  And the VIX is getting a little bounce to 14.30, up 3%.

Trading comment: Global markes are pulling back on today's economic data which points to further slowing.  The markets have also risen a lot recently so some folks may just be taking some profits.  My sense is still that portfolio managers remain in dip buying mode, so if today's selling can't pick up any steam I would expect to see markets firm a bit late in the session.  The S&P 500 is holding that 1450 level that it tested this morning and bounced from.  The other change in character today is that money is flowing to defensive areas like consumer stables, telecom, tobacco stocks, etc.