After 10 weeks of steady gains, the market has now rattled off two straight weeks of losses. Are the bears coming back or is a prelude to a bull run?
There is nothing wrong with being cautious and fearing that this could be the start to another slide like last August or this past January.
US Data
Data was soft for much of the week. Oil inventories disappointed, showing more of a glut than expected. The all-important jobs report came out and disappointed on several fronts. Unemployment held steady at 5.0%, while the participation rate fell to 62.8%, and only 160,000 nonfarm jobs were added in April, 42,000 less than expected[1].
The lone bright spot to the jobs report was that wages increased an impressive 2.4% year over year (YoY)[2]. This statistic is meaningful because, more wage growth should result in more inflation to come. The important thing about the job report is the influence it has on Janet Yellen, The Chair of the Federal Reserve Board (FRB). Many people believe that weak jobs data could keep the FRB from raising interest rates in June.
International Data
Canada is experience a wild fire that has evacuated 90,000 people! The oil-producing town that is on fire is causing a supply disruption out of Canada. This disruption could provide a short-term floor for oil prices.
China manufacturing data came in weaker than expected, but still in excess of 50. To the contrary, a private measure of PMI manufacturing data showed Chinese activity at 49.4, down from 49.7 the prior month[3] and in contraction.
The Eurozone released PMI data last week coming in at 53.0. In addition, concerns over a Brexit still loom, and have cause a healthy dose of market losses in Europe.
Conclusion
Even with the recent soft patch of economic data and light earnings, remember that soft earning should provide a help to corporations as their future production would be competing against a smaller number.
In addition, the financial market swings in the August and January sell offs were far more fervent than this most recent trend. Short-term volatility should prove re-occurring through-out 2016; and prove valuable to certain asset classes through-out the year.
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Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.
[1] www.investing.com – Economic Calendar
[2] www.mfs.com – week in review
[3] www.investing.com – Economic Update