More Signs Of Economic Slowdown

The market is under selling pressure this morning, after a handful of weaker than expected economic reports has investors questioning the strength of the economic recovery.

The ISM Manufacturing Index came in below expectations at 53.5, well below last month's reading of 60.4, and the lowest level since Sept. 2009.

Also, the ADP Employment report showed that private payrolls in April increased by just 38,000, vs. consensus for 170,000 payrolls. That is quite a discrepancy, and has caused several brokerage firms (including Goldman and Credit Suisse) to lower their estimates for Friday's jobs report.

Asian markets were mixed overnight. China's manufacturing survey also eased to a nine-month low (52.0), while Australia's GDP contracted -1.2% in the first quarter, as the Queensland flooding affected the nation's economy. They expect a strong rebound in 2H11.

The economic data has pushed the 10-year yield below the 3% level, currently 2.98%. And the volatility index (VIX) has jumped +8% this morning to 16.65.

Financials are getting hit the hardest this morning, down -2.1%. Large-cap tech is actually faring quite well, with several notable names bucking the weakness so far, including: AAPL, GOOG, VMW, MELI, PCLN, APKT, and CHKP.

Oil prices are lower to $101.75, while gold prices are up a tad near $1537.

Trading comment: It looks like yesterday's strength could have been more month-end window dressing than anything, and that today reality has sunk back in. Some of the worry certainly has to do with QE2 ending in June, and the worry about the economy growing on its own, post-stimulus. But we have had the same concerns each of the last 2 summers, with the economy picking back up later in the year. I don't want to be pollyannish about this, but right now I am looking at the data as simply lumpy and uneven, as opposed to joining the camp looking for a new downturn.

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Monday Morning Musings

The markets are continuing to bounce from their oversold levels last week. This morning, stocks are up sharply on news of a bailout package for Greece. The Dow was up 100 points at the open, although it is fading a bit at the moment. We will have to see if month-end buying keeps a bid under stocks into the close.

The big news is obviously the prospect for a German-led bailout package for Greece. Details are thin right now, but the rumors are that it would avoid a total restructuring of Greek debt with more details coming out by the end of June.

Asian markets were up sharply overnight, led by a 2.2% rally in Hong Kong. China snapped an 8-day losing streak with a 1.4% bounce. Even India rose, despite GDP in the country slowing from 8.3% to 7.8%.

In economic news, the Case-Shiller home price index showed prices fell 3.6% in March to a new multi-year low. Consensus expectations were for a 3.4% drop.

Commodities are rallying, aided by the dollar being pushed lower due to the rally in the euro. Oil prices have topped $102.50, and gold prices are slightly higher to $1537.

The 10-year yield is flat near 3.05%, after a prolonged slide since topping out at 3.6% back on April 8th. At 3.05%, the bond market really seems far more preoccupied with a potential slowdown than worry about the end of QE2 and what that might mean for buying demand for Treasuries.

Trading comment: Last week, we said the markets were oversold and we were buying for a trade. Today is day 4 of the oversold rally, and we are taking some chips off the table. We could easily see new beginning of month money come in tomorrow as well, which we would probably trim a little more into. At current levels, the market is still likely to be down a couple of percent for the month of May. June is likely to continue to be choppy, with lots of questions about what the environment will look like post-QE2 (June 30th).

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Stocks Beginning To Bounce From Oversold Levels

The markets are higher this morning, after falling for the last 3 days. Energy and materials stocks are the strongest so far, while defensive utilities and consumer staples are lagging.

The dollar is up modestly, but that isn't hurting commodities yet. Oil has risen back above the $100 level, and gold prices are higher near $1526. Silver prices are also moving up.

In economic news, durable goods orders fell more than expected in April, declining 3.6%. Though some of this decline is simply due to the robust 4.4% increase in the previous month.

In corporate news, Ralph Lauren (RL) is down -8% after missing earnings estimates. The retail sector is also lower on the day so far.

Asian markets were mostly lower overnight, and I continue to read troubling reports about China.

The 10-year yield is flat at 3.12%; and the VIX is down another 3% to 17.25.

Trading comment: I want to express my condolences to the family and colleagues of Mark Haines. Although I never met Mark Haines, CNBC has been on in the background of my office for the last 15 years. So I listened to Mark reporting on the markets every morning, and I can't count the number of interviews I've watched him give. He had a strong presence, was always no-nonsense and straight-forward, and wasn't afraid to challenge his guests. I have seen a lot of CNBC personalities come and go over the years, but he will be missed more than most.

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Goldman Upgrades Outlook For Oil Prices

The market is up slightly in early trading, but the action is mixed. Energy is getting the biggest bounce following yesterday's selling, as commodity prices rebound.

The dollar is lower today, which is helping boost commodities. Oil prices are up near $99.50, bolstered by a bullish call from Goldman Sachs, who sees Brent Crude prices hitting $120 this year and higher next year. Gold prices are also higher, trading above $1525.

The IPO hype is back in effect today, with Russia's Yandex (YNDX) coming public. Anytime you label something "the Russian Google", you are bound to attract some hype.

Asian markets were slightly higher overnight, a nice reprieve to the recent selling pressure. Europe's markets are also higher this morning.

The 10-year yield is higher to 3.15%; and the VIX is down -4% this morning to 17.53 after a big spike yesterday that took it as high as 20 at the open before fading as the day wore on.

Trading comment: As long as the major indexes are trading below their 50-day moving averages, a more defensive posture is warranted. That strategy has kept me out of a lot of trouble in my career. That doesn't mean you can't pick at your favorite names, with an eye towards lowering your basis, but I don't like to get aggressive until the indexes are back above their key moving averages. Short-term, I am looking for some buying into month-end, but that is just for a trade.

long GOOG

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Monday Morning Musings

The market is lower again this morning after weakness in overseas markets has been the primary driving factor behind the selling.

There were no economic reports here in the U.S., as investors took their cues from Asia and Europe. Asian markets were lower across the board overnight, led by a 2.9% drop in China. Europe is also lower this morning after Italy had its debt rating downgraded by S&P over the weekend, and Fitch downgraded Greece again.

This has also led to selling in the euro, and a bounce in the dollar. We are actually seeing the old "flight to safety" trade back on, with buying in the dollar, U.S. Treasuries, and gold.

Gold is up to $1511, but that is about the only commodity trading higher today. Oil prices have fallen back to $96.65, and the CRB Index overall is down roughly 1.3%.

Consumer staples stocks are down less than the market so far, but all sectors are in the red. Some food stocks are bucking the weakness, like Panera (PNRA), Chipolte (CMG), and Cheesecake Factory (CAKE).

Last week's IPO darling, LinkedIn (LNKD) is nearly 10% lower today, trading back near $84, which is slightly above the price at which it began trading on the first day it came public.

The 10-year yield is lower to 3.10%; and the volatility index (VIX) is up 6% right now to 18.55.

Trading comment: Bearish sentiment is on the rise. The CBOE put/call ratio averaged more than 1.0 for all of last week; the bull-bear spread in the AAII survey fell to -15%, the lowest level since last August; and the market is getting oversold again after 3 straight down weeks. The rub is that the S&P 500 is only 4% below its high, and we know that a 10% correction could easily occur this summer. My thoughts are just that any correction won't come in a straight line, and I think the bears may be overreaching at the moment. As such, I would wait for another bounce before doing any more selling, a strategy that worked well last week.

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More Problems In Euroland

The market was set to open relatively flat, but the news that Fitch downgraded Greece again led to some concerted selling in the market. Fitch lowered its rating on Greece to B+ from BB+. This also caused spreads to widen on other Euro bonds, and has put pressure on the euro as well.

It's funny that our market seems so tied to the euro, but lately any day that the euro is down, our markets are down also.

With the dollar higher, most commodities are under pressure as well. Gold is bucking the weakness, and trading above $1500 today. But oil prices are down again near $97, and soft commodities (cotton, cocoa, coffee, etc) are are lower on the day.

In corporate news, retailers are weak after Gap and Aeropostale (ARO) both lowered guidance and their stocks are getting hit.

Asian markets were mixed overnight; the 10-year yield is flattish near 3.16%; and the VIX is +8% higher today to 16.75.

Trading comment: Today's weakness is an example of how I said I though we would see renewed selling pressure after an oversold bounce. I continue to think the market will be choppy in the months ahead, with a possible slight downside bias. As such, the only real way to make headway in that environment is to trade around your positions to take advantage of the volatility. Opportunistic trading means adding to your positions on material weakness, and selling into any sizable rallies.

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LinkedIn, LinkedIn, LinkedIn!

Does anybody care about all the stuff going on in the market today, or is it all about the LinkedIn (LNKD) IPO? CNBC has a special orange box at the top left of their screen monitoring each tick in the price of the stock today.

I was shocked when I awoke this morning to see the IPO trading up to $80, up 75% from its IPO price of $45. But instead of taking a step back, and contemplating if the company is really worth 30x sales right now, investors have continued to pile in, and as of this writing, the stock has topped the $100 mark, up more than 120% from its IPO price. Congrats to all the LNKD employees today.

Now back to our regularly scheduled program. The Philly Fed index was very weak today, coming in at 3.9 for May from 18.5 in April. Talk about a falloff.

Existing home sales were also below expectations, as the housing sector is literally bumping along on life support.

The market had started off the day on high note, but has since pulled back into negative territory. Asian markets were mixed overnight, but Europe was higher this morning.

The dollar is roughly flat, but commodities are pulling back. Oil prices are down to $99, and gold is trading lower near $1486. But agricultural commodities are higher as unfavorable weather and flooding continues to delay planting in the U.S.

The 10-year yield is higher to 3.19%; and the VIX is roughly flat near 16.25.

Trading comment: The market had a nice bounce yesterday from its 50-day support, but volume was rather low. That signals there wasn't much conviction behind the buying. I continue to look for an oversold bounce in the market, of which today is the third day, and then for some continued downside probing.

The put/call ratio hit 1.15 on Tuesday, which is a bit of an extreme. So the selling pressure might have abated for the time being. Also, the AAII survey showed more bears than bulls today. So sentiment is getting in the right place to help the market put in a trading bottom, but I don't think we are there just yet. Be patient.

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