Friday, March 22, 2013

Can Cyprus Still Sink Stocks?

Say that title fast five times, lol.  The markets are higher this morning despite continued uncertainty in the Cyprus situation.  Officials are trying to put something together to avoid a collapse of the country's two largest banks.  There has been some chatter than a large Greek bank might step in. 

Eurozone officials are also discussing plans for imposing capital controls in order to prevent a run on the banks when they reopen.  This comes as the ECB has threatened to stop providing Cyprus with emergency liquidity support as early as Monday.

Despite the fluid situation there, stocks are higher again this morning, continuing the stairstep pattern we have been writing about.  Retailers are strong this morning after solid earnings reports from Tiffany and Nike (NKE), with the latter stock spiking to new highs.  On the disappointing side, Tibco (TIBX) is down -15% after missing on revenues and lowering guidance.

Asian markets were mostly lower overnight, possibly due to Cyprus worries.  But Europe is mixed to higher so far today.  We expect new on Cyprus to continue hitting the headlines.

The 10-year yield is flat near 1.93%.  The dollar index is lower, but so is gold (near $1608).  Oil prices are up a bit around $93.00.  And the volatility index is down another 3% to 13.50.

Trading comment: The market bent again yesterday but has refused to break.  As I mentioned earlier this week, the longer the S&P 500 chops around in a sideways fashion and consolidates its recent gains, the more likely it is that we see another breakout to new highs.  And when the SPX breaks to new all-time highs (1575) expect the media to glom onto it again and run all sorts of stories about "are we in a new bull market?".

KAM Advisors has long positions in NKE

Thursday, March 21, 2013

Consolidating Near High Ground

The market bounced back yesterday but on lighter volume.  Today stocks are lower again, at least in the early part of the trading session.  This is somewhat typical of the action we have seen in recent weeks.

In economic news, the March Philly Fed survey came in above expectations at +2.0, which is a nice turnaround from last month's reading of -12.5.  But it is making this data series a bit lumpy.

Existing home sales for Feb. hit 4.98 million units, which is still higher than the previous month's rate of 4.94 million units.  But homebuilders are pulling back today after hitting new highs yesterday.

In earnings news, Oracle's results fell short of expectations and the stock is trading lower on mixed guidance.  Although all 10 S&P sectors are lower this morning, ORCL's results are weighing on the tech sector which is lagging all others so far.

Overnight, Asian markets were mixed.  Although Japan rallied to hit its best levels in more than 4 years.  China's HSBC manuf. PMI came in above consensus at 51.7.  And New Zealand's GDP rose better than expected 1.5%.

Europe's markets are lower today amid weak economic data.  The manuf. PMI readings for France and Germany were both below expectations and continue to show sub-50 readings (read: contraction).  The overall Eurozone PMI was also below expectations at 46.6 and down from the prior month's level of 47.9.

Also in Europe the Cyprus situation remains unresolved.  Russia is looking like it won't provide any loans and the Cypriot banks remain closed.

The dollar is flattish today and commodities are mixed again.  Ag prices are up a little as are precious metals.  Gold prices are higher to $1613.  Oil prices are down near $92.70.  And copper prices are lower again nearing 7-month lows. 

The decline in copper is not a good sign for those economists who believe copper is a good leading indicator for the economy.  If one is expecting a pickup in global growth, you would want to see copper prices steady or rising. 

The 10-year yield is flattish near 1.93%.  And the volatility index is up 4% to 13.21, still below that 15 level we have been watching.

Trading comment: Since breaking out on March 5th, the S&P 500 has rallied as high as 1560 and pulled back to find support near 1540.  Currently it is hovering right in the middle of that 20-point range at 1550.  Obviously a break in either direction would be telling for the market.  But the longer the market trades in this sideways choppy fashion the more likely it is that we see another breakout to new highs.  That has been the pattern for months now, and until we see a change in character for the market the playbook that has been working is to expect more of the same.

Wednesday, March 20, 2013

Market Suffers First 3-day Pullback in 2013

The market closed lower yesterday for a third consecutive day.  That was the first 3-day losing streak for all of 2013, a pretty rare feat.  For those that follow "bullish stampede" rallies, this was one of the longest ones on record but the 3-day losing streak brings it to an end.  Fortunately for the bulls, the history of these long stampedes is that after a rest the market usually continues to do well.

Yesterday the market sold off fairly hard after the bank levy tax was voted down in Cyprus.  This morning there are more headlines out of Europe regarding Cyprus.  Futures got a boost this morning after rumors crossed the wires that Russia was going to offer some aid of its own.  But this report was refuted by Russia.  Germany's Merkel said she expects Cyprus to make a new proposal to the Troika.

Here in the US the Fed completes its 2-day meeting today and will release its statement.  We expect to hear more of the same from the Chairman, and that they want to maintain low interest rates and accomodative monetary policy until there are more concrete signs that the economy is on solid footing and unemployment is going down.

The dollar is weaker today but commodities are mixed.  Oil prices are up to $92.66 but gold prices are lower ($1608) as are silver prices.  Copper prices are higher and ag prices are up a bit.

The 10-year yield is a little higher to 1.93% right about on its 50-day average.  And the VIX is down 11% this morning down to 12.75.  While the low levels in the VIX haven't been pointing to heightened volatility in the market, the VIX index itself has become more volatile lately, with 10% daily swings becoming more frequent.

Trading comment: Dip buyers stepped in yesterday when the market was at its lows such that by the close the markets had recouped about half of their losses.  This morning the markets are nicely higher.  After a 3-day dip a bounce should be expected.  The S&P 500 is only 8 points away from a new high.  If that level is recapture soon, it would be another bullish sign.  But I would not rule out a bit more sideways consolidation first.  We started to put some money to work in equities yesterday and will continue to do so on pullbacks.

Tuesday, March 19, 2013

Housing Data Still Improving

The markets were higher in early trading but have since faded back to the flat line on the session.  The worries over the Cyprus bailout are still present, but the selling pressure lessened as yesterday's session wore on.

In US economic data, housing starts rose to 917,000 units in February from 910k the prior month.  Building permits increase to 946,000 in Feb from 904k the prior month.  So housing data continues to improve, and with housing being a big sector that should help support this fledgling economic recovery.  With home prices firm, that also supports the wealth effect which ties into consumer spending.  We are playing the housing trend via the home construction etf (ITB), which broke out to new highs today.

In Europe, the Cypriot parliament was expected to vote today, but it has been pushed back.  The banks remain closed, and trading in their stock market has been suspended for two days.  The country's president said that "parliament is destined to reject the bill."

Europe's markets are mixed today.  Germany's ZEW economic sentiment survey came in slightly ahead of expectations at 48.5, but the Eurozone ZEW survey was well below consensus at just 33.4.  Spain's bad loan ratio ticked up in January to 10.78% from 10.44%.

Asian markets were mixed to higher overnight.  The Reserve Bank of India lowered its key rate 25 basis points to 7.50%.  Australia monetary policy minutes left the door open to further rate cuts.  And the People's Bank of China announced plans to drain 39 billion Yuan through short-term repo agreements (tightening monetary policy).

The dollar is flattish today, and commodities are mixed.  Ag prices are higher, as are precious metals.  Gold is trading up near $1611.  Oil prices are slightly lower so far to $93.46.

The 10-year yield is easing back further, below its 50-day support to 1.91%.

And the VIX is another 2.5% higher to 13.70 after a big spike higher yesterday from its very low levels reached last week.  The spike in the VIX should not be a surprise given how low it had gotten.  All we needed was a small catalyst, and Cyrpus fit that bill.  It will be interesting to see if it gets back around that 15 level that it spent several months at or if it continues to hover in this new lower trading range.

Trading comment: The S&P 500 has not had more than two consecutive down days so far this year.  If it closes lower today that would mark the first such occurrence in 2013.  So today is fairly important in that sense.  It would be healthy for the market to continue to pull back and consolidate its recent gains.  There are still lots of folks who feel they are underweight equities at this juncture and are waiting for such a pullback to get in.  We have said that the market rarely accommodates the consensus wishes, so be alert for some twists in the script. 

KAM Advisors has long positions in ITB

Monday, March 18, 2013

Monday Morning Musings

The markets have opened on a weak note following selloffs in overseas market due to the unpopular bailout proposal for Cyprus.  Cyprus is a tiny country, but the ramifications of the terms of their bailout have the potential to spook investors across Europe.

The Troika said that for Cyprus to receive Eurozone bailout funds, the country would have to enact a 'stability levy'  on its citizens which would call for a tax on bank deposits of 6.75% - 9.9%.  This provision is not going to go over well, and citizens were lining up at their banks to pull money.  The banks have been unable to open, and may not open until Thursday.

The reason why other markets are watching so closely is that this is a new provision of the bailouts, and if this tax is levied on Cyprus people are left to ask who is next?  Could this happen to citizens in Spain or Italy?  That would lead to huge runs on the banks.  But this is a worst case scenario, and it is more likely that the damage is contained to Cyprus and viewed as a one-off.  That said, it bears monitoring.

In economic news in the U.S., the NAHB Housing Market index came in at 44 vs. 46 in the prior month.

Asian markets were down across the board overnight after news of the Cyprus bailout.  Japan was down -2.7%.  China's house prices rose 2.1% last month.  And Hong Kong's unemployment was in-line at 3.4%.

Europe's markets are also lower today.  A flight to safety can be seen in the German bunds where the 10-year yield traded down 6 basis points to 1.40%.  That's even lower than the U.S. 10-year yield which today is lower by 5 basis points to 1.95% and sitting right at its 50-day support.

The volatility index is spiking today, up 13% so far to a still relatively low level of 12.85.

Trading comment: The Cyprus news could turn out to be much ado about nothing.  But as our markets have been marching relentlessly higher it is certainly seen as enough to take some profit taking.  So far the selloff doesn't appear to have the teeth behind it to really scare investors.  Unless we see a much steeper selloff into the close I would expect dip buyers to show up again in the next day or so.  That would fit into the continuing stair-step market pattern.  We have not done any buying yet, but will likely dip our toe into the water today while still keeping some powder dry to do more buying if we continue to pullback.

Friday, March 15, 2013

Odd Drop In Consumer Sentiment

I haven't dig into the numbers, as I'm only an armchair economist but today the Univ. of Michigan consumer sentiment index dropped to 71.8 from 77.6 last month.  That's a pretty big drop, and its lowest level since December 2011.  I would be willing to bet that there has never been a drop that large at the same time the Dow was making new highs.

Other consumer sentiment figures don't seem as bearish, so maybe this will turn out to be just a one-month blip.  We shall see.

In other economic news, Feb. industrial production rose 0.7%, above expectations.  And capacity utilization ticked a bit higher to 79.6%.

Financial stocks are mostly bucking the weakness after the Federal Reserve released its latest stress test results.  Only Ally Financial and BB&T failed to meet the requirements.  Other banks, like Bank of America (BAC) and Wells (WFC) either raised their dividends or increased stock buybacks.

Asian markets were mixed overnight.  China's foreign direct investment fell 7.3%.  Singapore's retail sales declined -2.0%.  And the cabinet of Japan's PM raised its economic assessment for the third month in a row.

European markets are modestly lower.  The Eurozone CPI rose 1.8%.  And the Troika agreed to give Portugal a one-year extension (until 2015) to reach its 3.0% budget deficit-to-GDP target.

The dollar is lower today and helping some commodities.  Oil prices are higher to $93.40.  Gold is up near $1595 and silver prices are higher also.  But ag prices and copper are lower.

The 10-year yield is lower today, back down to 2.00%.  And the VIX was as much as 5% higher earlier, but so far has faded back and is now up just 1% to a still very very low level of 11.40.

Trading comment: I still see folks trotted out on CNBC and every single one of them is calling for a small pullback that can be bought.  Since the market rarely likes to accommodate the consensus opinion, it makes it more likely that we see one of two alternate scenarios: Either the market continues to stairstep higher and frustrate everyone who is waiting for a pullback to buy, or the market sells off harder than most anticipate and scares those who are waiting for an orderly pullback to feel comfortable stepping up and putting money to work. 

KAM Advisors has long positions in BAC and WFC

Thursday, March 14, 2013

Investors Like Trend In Jobless Claims

The market is higher again in early trading with the S&P 500 getting closer to its all-time highs.  I would expect another round of media hype touting the stock market once this happens.  The S&P really needs to get above 1575 to make an all-time high.  It is currently near 1560.

In economic news, today's weekly jobless claims were pleasing to the economic bulls.  Jobless claims declined by 10,000 to 332,000.  This marks the 3rd consecutive reading below the 350k level which was basically the floor for most of last year.

Asian markets were higher overnight.  The Bank of New Zealand held rates unchanged at 2.50%.  S. Korea's central bank held their rates steady at 2.75%.  And Australia's  unemployment rate remained at 5.4% vs. expectations for an uptick to 5.5%.

Europe's markets are also higher today.  Spanish retail sales fell -10.2%, but this was a smaller decline than expected.  In Greece, reports indicate the Troika left without reaching a final agreement on the next tranche of aid.

The dollar is a bit lower today, but commodities are mixed.  Oil prices are a touch higher to $92.75.  Copper prices are higher also.  But gold prices are lower near $1585, silver prices are down, and ag prices are slightly weak as well.

The 10-year yield is hovering around 2.05%, a level its been flirting with for the last 5 days.  And the volatility index continues to trade down, now around 11.65.  This is a very low level.  The last time we saw the VIX this low was April 2007.  It's not a perfect timing indicator, but I would expect a selloff in the near future that causes a spike in the VIX from these low levels.

Trading comment:  The stairstep market continues, and we are beginning to sound like a broken record.  The S&P paused briefly for 2 days and is attempting to work its way higher today.  Of course, the longer this steady uptrend continues the more complacent folks will become and that could set the market up for a bigger correction.  But as of now we have not seen sentiment get too complacent.  The AAII survey of individual investors comes out today, but for the last 2 weeks it has shown more bears than bulls it its survey, a rare occurrence with the markets at fresh highs.

Wednesday, March 13, 2013

Retail Sales Rise In Feb

The market is roughly flat in early trading, and once again yesterday we saw sellers try to push the market lower but dip buyers again showed up late in the day and helped save the Dow and keep in in positive territory.  The S&P closed only slightly lower on relatively light volume.

In economic news, retail sales for the month of February rose 1.1% which was better than expected, and up from the prior month's reading of 0.2%.

Utility stocks are leading the early action, while the materials sector is lagging.  Financials are up slightly so far.

Asian markets were lower across the board overnight, led by a 1.5% drop in Hong Kong over concerns about a slowdown in China's property markets.  S. Korean unemployment was reported at 3.5%, slightly ahead of what the market was looking for.

European markets are also lower today, led by a 1.6% drop in Italy.  Eurozone industrial production declined 0.4%.  Italy auctioned off 3-yr debt at a yield of 2.48% vs. 2.30% from the previous auction.  And reports indicate the Troika and Cyprus are in talks regarding a smaller bailout agreement for the troubled nation.

The dollar index is trading higher today, and weighing on commodities.  Gold is lower near $1586, and silver and copper prices are lower also.  Ag prices are down today as well.  Oil prices are bucking the trend and trading higher to $93.08.

The 10-year yield is higher today, within its recent range and trading at 2.05%,

The volatility index remains remarkably low at 12.32.  When the VIX is this low, we often see a selloff in the market even if it turns out to be brief.

Trading comment: Waiting for a market pullback continues to be a difficult plan.  We have been looking for situations to add to stocks that have been performing well but are not too extended in price.  That list isn't too large these days as many stocks have had big runups and look like they are in need of a rest at this point and not worth chasing.  But investor sentiment is not nearly as high as we would expect with the market at new highs, so we continue to think pullbacks will be brief affairs in this environment.

Monday, March 11, 2013

Monday Morning Musings

The markets are only slightly lower after breaking to fresh highs on Friday on the heels of a pretty solid jobs report.  It used to be that we looked for jobs increases of 400k during a recovery, but these days folks seem to be pretty happy with 200k+.

The unemployment rate ticked down a bit, but some of that was due to how they calculate the labor force.  And we are still a ways away from the 6.5% unemployment rate that the Fed has cited it would like to see to take its foot off of the monetary policy accelerator.

There was also a pretty strong reaction in the 10-year yield, which ticked up to 2.08% on Friday.  With an improving economy one would normally expect yields to creep higher. But these are not "normal" times, and with the Fed trying to keep rates down its hard to see what the natural level is that we could see the 10-year trade towards.  Currently, the 10-year yield is flattish near 2.05%.

There hasn't been much in the way of market moving corporate or economic data this morning, leaving investors to take their early cues from overnight action.  Asian markets ended mixed overnight with Japan slightly higher and China a bit lower.

China's CPI rose 3.2% yr/yr, a bit hotter than expected, but the PPI fell -1.6% yr/yr.  Industrial production increased 9.9% and retail sales rose 12.3%.  Both of those figures were below expectations causing some concern about slowing economic growth.  There were rumors that one Asian brokerage firm lowered its GDP forecasts for 2013.

Europe's markets are mostly lower today also due to disappointing data.  French industrial production declined -1.2% vs. an expected gain.  Italian GDP was left unchanged from the last reading at -0.9%.  Portugal's Q4 GDP contracted 1.8%.  And Swiss retail sales were also below consensus at 1.9%.

Despite the flattish market this morning, the volatility index (VIX) has fallen all the way back to 12.15.  Hard to believe we are back at the 12 level so quickly after touching 19 a couple of weeks ago.  But there doesn't seem to be much fear in the market today.  Of course, the last time we got down to these levels we saw a pretty sharp selloff in stocks, albeit it brief.

Trading comment: The stairstep market continues and the slow grind higher hasn't offered many great buying opportunities unless you moved quickly to take advantage of the 1-2 day pullbacks.  We continue to trim those stocks that have really had big runs in recent weeks, like some of the consumer staple stocks, while looking to put cash to work in stocks offering fresh breakouts from consolidations.  Some may be tempted to look for stocks that have been lagging in this market in hopes of them playing catch up.  But that type of investing hasn't worked well for us in the past.  We prefer to focus on stocks that are market leaders.  The one exception would be AAPL, which we continue to hold in hopes that it will soon reverse its recent downtrend but so far has been disappointing.

KAM Advisors has long positions in AAPL

Wednesday, March 06, 2013

ADP Points To Strong Job Gains

The Dow hit an all-time high yesterday, although the S&P 500 remains about 35 points away and the Nasdaq is probably years away.  But the headlines sparked some interest, and I got questions from some friends who haven't asked about the markets in 10 years, lol.

It remains to be seen if folks continue to return to the market with all that cash that has been sitting on the sidelines.  Some strategists think that when recent bond fund purchases start to show losses on investor statements that the lure of equities will pull them in.  But bond yields are going to have to start moving up for that to happen, and the economy likely needs to improve more to support higher yields.

This morning the ADP Employment report showed the economy added 198,000 jobs in February, which was above expectations.  Sometimes a strong ADP report leads to a strong govt. payrolls report on Friday, but not always.  And to bring the unemployment rate down we probably need to see monthly jobs numbers in excess of +200k.

Asian markets were higher across the board overnight following the record setting Dow close.  Japan led the way with a 2.1% gain.  In Australia, the economy grew +0.6% in Q4, in-line with expectations.

European markets are also higher this morning.  The Eurozone Q4 GDP figure was reported at -0.6% as the country remains mired in a debt-ridden weak growth environment.  That could cause leaders to rethink some of the austerity measures that continue to choke off any prospect for growth.  An IMF official said Spain must remain on track for its reforms, but the country's budget minister said no new taxes will be taking place.

The dollar is higher today, and most commodities are lower.  Oil prices are down to $89.65, copper prices are lower, as are ag prices.  Gold and silver are bucking the weakness, with gold only slightly higher to $1580.

The 10-year yield is rising again, and is back above its 50-day average to 1.92%.  And the VIX is up 1.5% but still below the 15 level near 13.65.

Trading comment: The Dow headlines about making a new record high is likely to put a little pressure on portfolio managers who remain underinvested.  Those folks likely have to continue to chase stocks higher to keep up.  But the disciplined investor can wait for good buying opportunities, which always come.  The put/call ratio has been very high the last 2 days, despite the positive action in the market.  That leads us to believe the many investors remain skeptical of this advance and that keeps the 'wall of worry' high-- which from a contrarian perspective is a good thing.

Tuesday, March 05, 2013

Break Out The Party Hats

Although there has been plenty of buildup in recent weeks, this morning the Dow Jones reached a new record high.  I expect the media to really make a big deal out of this, so expect to see it in the headlines everywhere.

CNBC reported that just 5 Dow stocks accounted for nearly 1/3 of its rise back to new highs.  Most investors prefer to look at the S&P 500, which is still 35 points from its all-time high, but it too looks like it will get there in the near future.

While I joke about breaking out the party hats, it is a major achievement and something that few people would have bet on several years ago in early 2009 when most folks wanted to give up on stocks for good.  It just goes to show you that the fear and greed cycle is alive and well.  While the news and circumstances may change from generation to generation, investor psychology does not.  Our guess is that we are still far away from a peak in the greed cycle.  Most folks are still shaking off the cobwebs from the last bear market and weary about getting aggressive in stocks.

In economic news, the February ISM Services index came in at 56.0, up from January's reading of 55.2.

In corporate news, Qualcomm (QCOM) announced a $5 billion share buyback.  But we have yet to hear anything from Apple (AAPL).  What is wrong with their Board of Directors?

Asian markets were higher across the board overnight, led by a 2.3% bounce in China.  China set a 7.5% growth target for 2013 which includes double-digit military spending increase.  The Reserve Bank of Australia held rates steady at 3.00%.

Europe's markets are also higher today, after most PMI services reports came in above expectations.  Spain was the only economy to miss consensus.  EU commissioner Rehn said that poor European economic growth may cause leaders to rethink current deadlines for deficit reductions.  That means we could start to hear talk of postponing austerity measures.  This could be a good thing, as the main focus for deficit reduction should be on economic growth measures.

The dollar is roughly flat today, and commodities are mostly higher.  Oil prices are up a bit near $90.41 and gold prices are higher to $1576.  Copper and silver prices are up slightly also.

The 10-year yield is bouncing a little back to 1.90%.  And the VIX has plunged back below the 15 level, down -5% today to 13.30 as the markets break out to new highs.

Trading comment: We have commented endlessly about the dip buyers who emerge on every pullback and the stair-step pattern of the market.  This recent mini-pullback lasted about 10 trading sessions, saw the SPX pullback fairly close to its 50-day support, and them move right back to new highs.  That has been the pattern for months.  At some point we will get a deeper correction, but it sure hasn't paid to sit on the sidelines and wait for said correction.  While many stocks are extended, fresh breakouts from consolidations remain attractive as the market stays in bull mode.

KAM Advisors has long positions in AAPL and QCOM

Monday, March 04, 2013

Monday Morning Musings

Markets opened on a weak note this morning after some disappointing action overseas.  There were no notable economic releases in the US this morning.

Overnight, Asian markets were mostly lower after officials in China announced more measures to cool rising property prices.  The measures include restrictions on home buying, implementing higher interest rates on second homes, and more strict enforcement of the 20% capital gains law on home sales.

Last night there was also a cautionary piece on 60 Minutes about China and how its property bubble has led to ghost cities where buildings have been erected but nobody has moved in.  In reaction to the news, China's property index plunged -10% and the Shanghai Composite shed -3.7%.  Hong Kong was also -1.5% lower in sympathy.

European markets are mixed this morning.  The UK's PMI came in at 46.8, which was below expectations.  And Italy's government is still in limbo with the upper house deadlocked.

The dollar is slightly higher today and commodities are mixed.  Oil prices are weaker near $90.33 while gold prices are up a bit to $1576.  Copper is a tad lower while ag prices are mostly flat.

The 10-year yield is flat around 1.85%.  And the volatility index is up 2% this morning still above the 15 level around 15.65.

Trading comment: The S&P 500 was basically flat for the week last week.  Although there were some pullbacks along the way, dip buyers stepped in quickly such that the index usually closed near its highs for the day.  Overall this is constructive action for the bulls, and those waiting for a deeper pullback continue to be frustrated.  We continue to trim stocks that have had strong runups and appear to be extended in prices.  At the same time we have been willing to add to stocks that have pulled back or are exhibiting fresh breakouts.  This type of rotation looks set to continue.  Consumer staples stocks are the ones that look the most vulnerable to a pullback.

Friday, March 01, 2013

Stocks Rebound From Early Dip

The markets started out of the gate on a weak note, but have already recouped most of their early losses.  Overnight foreign markets were fairly weak, in addition to a weak close here for US markets yesterday.  But some solid economic data led to some early dip buying.

The ISM Index for February came in better than expected at 54.2, its highest level since June 2011.  Also, the Univ. of Mich. Consumer Sentiment survey for February rose to 77.6 from its previous reading of 76.3.  So consumer sentiment has been bouncing in recent readings. 

Asian markets were mostly lower overnight after the latest Chinese PMI reading declined to 50.1.  That's still above the 50 level that marks the line between expansion and contraction, but its the lowest reading since last September.

In Europe, markets are also lower led by a -2.2% decline in Italy.  Italy's PMI came in worse than expected at 45.8.  The country's debt-to-GDP ratio hit its highest levels in more than 20 years.  The overall Eurozone PMI came in slightly ahead of consensus at 47.9 (still in contraction zone) and the Eurozone overall unemployment rate ticked up to 11.9%.

The 10-year yield is lower again to 1.85%, and not back below its 50-day average.  The VIX is bouncing 2.8% back near the 16 level.

Trading comment: The first day of the month has seen gains in most recent months with new flows coming into equities.  Today the market bounced from its early losses, but has been fading a bit since.  It's still early, but a weak close today would likely mean more choppiness and consolidation next week.  March is a month often known for heightened volatility.  So we want to continue to manage our risk closely.  A further pullback in the market would likely offer a good opportunity to scale into market leading stocks that have been too extended to chase.  Have a good weekend--