Archive - May 1, 2015 - Story

"We remain constructive on the US for three reasons: 1) economic data should improve in the next few quarters; 2) the Fed does not seem to be in any rush to move early and a June rate hike seems unlikely; and 3) while investors are focused solely on the first rate raise, we think the overall path higher will be gradual, in contrast to previous rate shifts. These factors should create an environment where growth improves and monetary policy stays flexible, which is generally good for equities (higher multiples notwithstanding). We may follow last year’s playbook and ignore the old adage to “sell in May and go away.”

Investors are clearly in a bit of a no-man’s land of market narrative, with the dollar weakening and U.S. corporate earnings slipping.  Market participants, like all pack animals, appreciate clear direction and leadership – and we don’t have much of either right now. When considering how they will react, we can compare the two competing frameworks for understanding market behavior: the "Random Walk hypothesis" and the "House money effect." The first states that markets move in random patterns, with prior activity having no bearing on future price action. The latter shows that individuals do actually consider prior gains and losses when making economic decisions. Let’s just hope investors hold to their belief that it’s the house’s money at work here, and that they don’t walk randomly out of the market.

April's Manufacturing PMI printed a minimally disappointing 54.1 (against 54.2 prior and expectations) - its lowest since January and hardly the post-weather Q2 surge everyone was hoping for. New Orders and Production were the weakest since December and export business fell for the first time in 5 months and input prices dropped for the 4th month in a row; all leading Markit to demand The Fed remain patient. ISM Manufacturing missed expectations and has not risen for 5 months (its longest streak since the recession) with a contraction in the employment index to lowest since Sept 2009. And then Construction Spending plunged 0.6% (against a +0.5% exp.) - the 7th miss in 10 months and worst April print since 2009.

Once again proving, "you get what you pay for," world-renowned Dennis Gartman unleashes his own brand of indecipherable nonsense advice to stock traders this morning...

Lowes' stock is down 2.5% in the pre-open (after notable weakness yesterday) despite the broad market's bounce, following reports that the home improvment retailer sold the same 'toxic' flooring as Lumber Liquidators:

*LUMBER LIQUIDATORS SHORT SELLER SAYS LOWE’S SOLD TOXIC FLOORING
*ZHOU SAYS LOWE'S SOLD SIMILAR QUESTIONABLE FLOORING FROM CHINA

Zhou intends to present the report proving this later today and for now Lowes has said its flooring is safe and compliant with regulations.

In reviewing the financials of one of the largest shale producers in the United States, Whiting Petroleum, we can’t help but notice the parallels to the .COM era of 1999 which, to some extent, has already returned to the technology and biotech sectors of today.

It's 830ET, do you know where your ubiquitous precious metal seller-in-size is? At 834ET, someone "special" decided it was the perfect time to sell $590 million worth of gold futures...

Earlier this week, Greek pensioners discovered that a "technical glitch" caused the delay of some €2 hundred million in pension payments. Apparently, Athens ran out of money. Exhausted, exasperated, and short on cash, restless retirees have now taken to storming pension fund meetings and forming lines at banks.

The past few years have been a period of relative stability for the U.S. economy.  A lot of people have been lulled into a false sense of security during that time.  These people have become convinced that our problems have been fixed.  But they haven’t been fixed at all.  In fact, our problems are far, far worse than they were just prior to the last financial crisis. Don’t let this next recession take you by surprise.

Everyone swept up in the speculative tide of monumental student debt and dependence on state entitlements and/or Wall Street's speculative machine is not being carried to prosperity but to modern-day serfdom.

Sabre-rattling much? For the first time in history, Chinese and Russian navies will begin a significant joint naval exercise in The Mediterranean Sea in mid-May. As RT reports, Chinese Defense Ministry spokesman Geng Yansheng, "The aim is to deepen both countries' friendly and practical cooperation, and increase our navies' ability to jointly deal with maritime security threats," but diplomatically added "these exercises are not aimed at any third party and have nothing to do with the regional situation." Against a background of this week's "upgraded Japan-American military relationship" following Abe's visit to Obama, as one analyst notes, "the geopolitical significance of its exercising alongside Russia will not be lost on the U.S. and NATO."

• Record month ends in pain as biotech, small-caps, Apple tumble (BBG)
• Japan inflation rises for first time in nearly a year (WSJ)
• US Navy starts to accompany ships in strait where Iran seized cargo carrier (WSJ)
• Russia may be readying for new Ukraine offensive: NATO commander (Reuters)
• Big banks use loophole to avoid ban (WSJ)
• China April official PMI shows factories struggling to grow (Reuters)
• CME suspends traders for alleged Sarao-like manipulation (BBG)

Holidays in Europe and Asia left things quiet overnight after some traders used the last day of April to frontrun the old "sell in May and go away" market adage. Market closures also kept the Chinese day trading hordes from using a tiny beat on the official manufacturing PMI print as an excuse to pile more money into the country's equity mania, while Japanese shares ended mostly unchanged as investors fret over when the BoJ will deliver the next shot of monetary heroin. In the US we'll get a look at ISM manufacturing and the latest read on consumer confidence as we head into the weekend.