Stocks Retreat On Light Economic Data

The market is under selling pressure in early trading after a weaker than expected jobs report and some additional economic data that came in weaker than expected.

The April ADP Employment report showed the private sector added 119,000 jobs in April, but this was below expectations for 155,000 jobs.  Additionally, construction spending declined -1.7% in March which was well below consensus.

The other concern was China's manufacturing PMI data which eased to 50.6 from 50.9 previously.  It is still barely above the 50 level that marks the difference between expansion and contraction in the industry, but it highlights concerns over a slowdown there.

Another odd market indicator is the action in copper.  The copper etf (JJC) is near 3-year lows today.  Considering the forecasts for a pickup in 2H global economic activity, you sure wouldn't sense it from the action in copper (which is supposed to be very economically sensitive).

Most Asian markets as well as markets in Europe were closed for their Labor Day holiday.

The 10-year yield is falling further on the weak economic data.  The yield is all the way back to 1.63%, near its December lows.  For the last year or so the 10-year has basically traded in this 1.50% - 2.00% range.  We think its likely the lower end of this range holds and the 10-year works its way higher.

The volatility index is 6% higher today to 14.30, but still below the 15 level we have been using as a key level to watch.

Trading comment: This is day 1 of a mild pullback so far.  Odds favor more of the same action, despite the crowd who cites the 'Sell in May and Go Away' axiom.  The market ramped up pretty rapidly from its recent test of the 50-day average to put it in position for new highs.  But its likely we could see some sideways consolidation first as the markets internal energy gets rebuilt for a solid move above the SPX 1600 level.