The Nitty Gritty Details:
Stocks opened slightly higher this morning amid mixed earnings and commodities gains. After struggling yesterday on some disappointing company outlooks, results this morning are a bit better overall. Market watchers will focus on the Federal Reserve Open Market Committee (FOMC) minutes this afternoon in what is otherwise a fairly empty economic calendar. European stocks were trading with a positive bias this morning as mining stocks rose on higher metals prices. With the exception of India, key Asian markets closed higher. Commodity prices are broadly higher, led by silver (+3.0%), U.S. crude (+1.5%), wheat (+1.5%) and copper (+1%). Gold is up $12, back to within striking distance of $1500 at $1492. The dollar is firm against the broad currency basket.
Looking back at Tuesday, major averages finished mixed as a late rally in Financials and weakening dollar helped the S&P end the day about where it started. Early weakness was driven by a disappointing outlook from a major technology provider along with some tepid economic data. Housing starts and industrial production both disappointed, sparking more fears that the economic slowdown might progress into something worse. Financials benefited from strong credit card delinquency data to top the sector rankings, along with Utilities, which continue to attract a defensive bid. The global growth story took a hit with Materials and Industrials each sliding more than 1% on the session. Commodities were mixed with the broad indexes garnering support from higher crop prices on weather-related harvest concerns, while lower oil, gold and silver weighed.
Around our financial planning firm this morning, we were discussing three items that we thought would be of particular interest to our readers:
The Markets Broken Down:
Credit card issues are getting better. Credit card delinquencies and charge offs continued their steady improvement in April, a month that historically sees deterioration. These metrics, which have been improving steadily since early 2010 and coincide with a better job market, point to a steadily improving – but still challenged – consumer balance sheet. Leveling off in oil prices and an improving (but still tough) job market are supportive of near-trend consumer spending in the 2.5% to 3% range.
The FOMC minutes are due out at 2 PM ET today. The Federal Reserve will release the minutes of the April 26-27 FOMC meeting early this afternoon. Normally, the minutes (a scrubbed version of the proceedings of the Fed’s policy meeting) garner some attention from the market, looking for clues as to the Fed’s next move. This time around, however, the significance of the minutes is muted by the fact that Fed Chairman Bernake held a press conference the day of the FOMC in April. Still, the minutes are likely to show Fed policymakers vigorously debating the exit from QE2, the pace of inflation and the pace of the economic recovery. Next up for the Fed is the Beige Book (a qualitative assessment of business conditions in each of the 12 Federal Reserve districts) on June 8th. The next FOMC meeting is June 22nd.
Recent monthly economic data including employment, manufacturing and retail sales continues to point towards solid growth. However, the growth momentum seems to have stalled somewhat as the economy transitions from a strong recovery to uneven, modest growth. In the past week, stabilization occurred in initial jobless claims and commodity prices. Shipping traffic slowed, but mortgage applications rose in response to lower rates. Business lending continues to rise.
As always, email me here with your questions or comments. I love to hear from you and thoroughly enjoy the “intellectual debate” with our clients and friends that these opinions generate.
Greg Powell, CIMA
Note: The opinions voiced in this material are for general information and are not intended to be specific advice. Any indices such as the S & P 500 can’t be invested into directly. Past performance is no assurance of a future result.
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