US stocks have been unable to hold on to yesterday’s Alcoa and FOMC driven gains. The Dow has turned downward after failing to retake 17,000 while the Russell 2000 has turned sharply lower falling nearly 2% overnight indicating the breadth of the selloff is growing.
The reason for today’s retreat appears to be growing concerns about growth outside of the US. Industrial production releases for France and Italy were flatly terrible, Chinese trade numbers were soft, while Australian job data was neutral at best with part-time job growth obscuring a loss in full-time positions.
US jobless claims were better than expected this morning, a sign it’s economy continues to improve. Positive news on employment combined with rising inflation could potentially be trouble for stocks in the coming months. Yesterday’s FOMC minutes the end of tapering is likely to be bumped up to October from December and the central bank is likely to release plans for normalizing monetary policy
by the end of the year. This suggests that the liquidity party is rapidly coming to an end leaving QE inflated stocks vulnerable as we move through earning season into the seasonally weakest time of the year between August and October.
Trading action in indices over the last few weeks indicates that many investors have become complacent of late. This week, we have started to see intraday action increase off of news indicating that may be changing. Even though traders responded positively to Alcoa’s strong earnings, the reaction has been short-lived and it appears that we may need to see a lot more good earnings news to prop up a stock market that appears to be heading into a significant correction.
On the flip side, gold is breaking out today. In addition to the potential for increasing money supply in Europe later this year, financial stresses in Portugal and increasing risks facing stocks appear to be stoking interest in havens for capital like precious metals once again.
Family Dollar $0.85 vs street $0.89, same store sales (1.8%)
Economic reports released overnight and this morning include:
UK monetary policy decision no change to interest rates or QE as expected
South Korea interest rate 2.50% no change as expected
Canada new house prices 1.5% vs previous 1.6%
US jobless claims 304K vs street 315K
Australia employment change 16K vs street 12K
Australia full time jobs (4K) vs previous 22K
Australia part time jobs 19K vs previous (27K)
Australia unemployment rate 6.0% vs street 5.9%
China trade balance $31.5B vs street $36.9B
China exports 7.2% vs street 10.4%
China imports 5.5% vs street 6.0%
France industrial production (3.7%) vs street (1.0%)
France manufacturing prodn (3.0%) vs street 0.8%
France consumer prices 0.5% vs street 0.7%
Sweden consumer prices 0.2% vs street 0.0%
Norway consumer prices 1.9% as expected
Italy industrial production 1.2% vs street 1.5%
UK trade balance (£2.4B) vs street (£1.6B)
Greece industrial production 1.8% vs street (1.2%)
Greece unemployment rate 27.3% vs street 26.7%
NZ Business PMI 53.3 vs previous 52.7
Japan producer prices 4.6% vs street 4.5%
Japan machine orders (14.3%) vs street 10.1%
Japan consumer confidence 41.1 vs street 40.0
Economic reports due later today include:
10:30 am EDT US natural gas street 89 BCF
FOMC members George and Fischer speak during the day