Friday the 13th… often marred by the stigma of being an unlucky day. Holding to form, this past Friday markets shed 1%. The question should be, was the down-turn warranted?
US Data
Job openings, as measured by the JOLT’s report came in at 5.757 million openings[1]. A great measure of job availability which could send unemployment higher. That is right, higher. If there are more opportunities available more discouraged unemployed workers would come back into the job market, causing a short-term increase in unemployment as positions are being filled.
Crude oil inventories supported prices. A 2-million-barrel drawdown was expected and it was closer to 6.2M barrels[2]. Firm oil prices bring more optimism about 2nd quarter profits as well as risks regarding inflation.
And then there was Friday… Markets shed 1% but the data out on Friday did not support that move. Much of the concern as of late was related to weak consumption during the 1st quarter. This should not be that surprising as 1st quarter is generally the weakest consumption quarter of the year. This is often the case due to winter weather and the holiday credit hangover. Friday brought encouraging data that could spell a consumption rebound for the 2nd quarter. Retail sales, consumer expectations, and consumer sentiment all bounced back.
International
Eurozone GDP data came in at 1.5% annualized, while inflation has lagged. European central bank activity has helped stimulate activity, however due to energy prices and recent strength in the €, inflation has been prevented from gaining hold.
Italian financial stocks have held down progress in Europe as well. Year to date the sector has shed nearly 40%, largely due to a lack of capital and loan write downs[3].
Greece… That is a word I was hoping to avoid this spring… EU leaders are trying to organize a bail-out for Greece as major debt payments are due in July. The next meeting where results are expected would be May 24th.
In addition, the chances of a ‘Brexit’ is contributing to stagnation out of Europe. It is believed a stall in English activity is a ‘wait and see’ approach to the vote in June.
Brazilian president, Dilma Rousseff, is undergoing impeachment, culminating last Thursday in her removal from office for the next 6 months as she goes through impeachment hearings.
China continues to bounce back and forth from a consumption focus to an industrial focus. They most recently claimed that they will no longer support debt based stimulus in an effort to stabilize their economy. This means one of two things, 1) they will find creative ways to hide the debt creation, or 2) we should expect to see less favorable data out of China in the near term.
Conclusion
In all, earnings continued to struggle, but economic data did not really reflect the market performance domestically. Internationally there was plenty of concern to go around. International focus impacting domestic markets may spell a profit pull environment as opposed to a market in peril.
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[1] www.investing.com – economic calendar
[2] www.investing.com – economic calendar
[3] www.troweprice.com – global markets weekly update