Monday Morning Musings
Markets are lower in early trading following weakness in overseas markets. This morning's economic data was also weaker than expected and is not providing any boost. And the commodity selloff continues today in earnest and is likely exacerbating fears in the market.
In economic news, the Empire Manuf. index for April came in at 3.1, which is down from the prior month's reading of 9.2. Also, the NAHB housing market index fell to 42 from 44 last month and that has homebuilding stocks trading lower today as well.
Last night it was reported that China's 1Q GDP grew 7.7% while the consensus expectations were for growth of 8.0%. Anytime we hear news that China may be slowing down it spooks investors and most Asian markets trade lower. It also didn't help that 13 people have been reported to have died from bird flu.
In Europe markets are also lower. Weekend reports suggested that German Chancellor Merkel might retire from her post in 2015.
In M&A news, Dish Network offered to buy Spring for $25.5 billion, a 12.5% premium to Friday's close. And Thermo Fisher (TMO) offered to buy Life Tech (LIFE) for $76, a 12% premium.
In earnings new, Citi topped estimates and is trading higher this morning. That is helping the financial sector withstand some of the selling this morning. Commodities are getting hit hardest and that is pushing the energy and materials stocks down the most so far.
Gold is plunging for a 2nd day. So far the price of the yellow metal is down more than $100 today below the $1400 level. Silver is also getting hit hard, and copper is down but not as much. Oil prices are lower as well, below the $89 level..
The 10-year yield is a bit weaker near the 1.71% level. And the volatility index is up 7% to around the 13 level. I would have expected to see a bit more of a spike.
Trading comment: So far the technical damage in the market is mild. The S&P 500 is down for a second day, but still barely off its all-time highs. The small-cap Russell index is down more, and testing its 50-day support. Since the Russell has been a leading index this year, its action bears monitoring. But this selloff looks kind of like another sector rotation with energy and materials stocks being sold, but financials and healthcare stocks being accumulated. Big picture we are letting stocks consolidate a bit more and then looking for opportunities to add to positions.
KAM Advisors has long positions in C