Strong Economic Data Reverses Stocks Early Slide

Stocks started off the session markedly lower, following on the heels of lower markets overnight in Asia, and weakness this morning in Europe also.

There were comments that the ECB believes eurozone banks face further writedowns over the next 18 months.

Yet soon after the opening weakness, we got some strong economic reports in the U.S., and that turned our markets around. The ISM Manufacturing index for May came in at 59.7, above estimates. And construction spending for April rose +2.7%, its sharpest increase since 1998. It's nice to see investors focusing on these economic datapoints rather than solely looking at the macro picture in Europe.

The euro is also up a bit vs. the dollar, and that is helping commodities. Oil is higher to $74.85 and gold is also up again near $1226. Despite the boost in oil prices, the energy sector is the weakest so far today, as concerns around the oil spill from BP dominate the headlines.

Tech is leading the action, followed by consumer staples. Utilities are weakest after energy.

The 10-year yield is lower to 3.28%; and the VIX hit 35 this morning, but has fallen back to 32.65.

Trading comment: The market is still oversold, and likely to see more of a bounce. After a big down month in May, I don't think June will be bad. But I still expect it to be choppy. The longer the VIX stays above 30, the more likely it is that we continue to see high volatility. But bearish sentiment is growing, and that has been a key ingredient to helping the market put in trading bottoms in the past year.