Monday Morning Musings

The markets were mostly lower in the first hour of trading but are now more mixed as the Nasdaq has recouped its early losses.

In economic news, April retail sales surprised to the upside with an increase of 0.1% after declining -0.5% last month.  Also, in March business inventories were unchanged vs. expectations for a 0.3% increase.

Overnight, Asian markets ended on a mixed note.  Japan hits new 5-year highs while China and Hong Kong were lower.  Over the weekend the G7 meetings failed to point the finger at Japan for weakening the yen to gain a competitive advantage.  In China, industrial production rose 9.3% from 8.9% the prior month.  And Australian home loans rose 5.2%.

In Europe most markets are lower today.  The German finance minister said he opposes purchases of asset-backed securities by the ECB.  Swiss retail sales slipped -0.9%.

So far, defensive sectors like healthcare and consumer staples are bucking the weakness, while materials, energy, and industrials are lagging.

The 10-year yield is a little higher again to 1.92%.  The volatility index is up 1% but still at very low absolute levels of 12.75.

Commodities are mostly lower.  Gold prices are lower near $1432 and oil prices are also down around $94.75.

Trading comment: Its still early in the session, but for the last few days the markets have been doing more of the same.  The indexes are consolidating recent gains in a sideways fashion without really declining in any big way.  And underneath the indexes the rotation out of formerly defensive areas like utilities and into more growth areas continues.  So far, the 'Sell in May' folks have been sorely mistaken on thinking that pattern would show up in spades this year.  Calling tops in the market are even more difficult that calling bottoms.  One reason is that tops in the market are often more of a process, with several test of the markets highs while lows often times are more of a one-time event where the market plunges to new lows and then reverses from there on a surge in volume.  But for now we remain in that stair-step rally we have been describing all year.  Don't fight the tape.