Where Is The Pent-Up Consumer Demand?

Markets are moving higher in early trading with the S&P 500 making a new high for the year.  More growth stocks are bouncing from their recent selloffs, but small-caps continue to lag today.

In economic news, retail sales for April increased only 0.1%.  And if you take out transportation (autos were +0.6%), retail sales were flat.  This was well below expectations and doesn't bode all that well for a big snap-back in Q2 GDP.

Economists were predicting that pent-up demand that had been created by the extreme weather conditions earlier this year would be unleashed in Q2 and we would see a sizable snap-back.  So far that has not come to fruition.  Hopefully May will show stronger figures.

Asian markets were mixed overnight.  Chinese retail sales rose 11.9%, but this was below expectations.  Industrial production was also a touch light at 8.7%.

European markets are also mixed.  Eurozone economic sentiment fell to 55.2 from 61.2.  But Germany saw a bigger decline in economic sentiment to 33.1 from 43.2.

Oil prices are higher over the $101 price level while gold prices could not remain above $1300 and have eased back to $1295.

The 10-year yield reached 2.66% yesterday but has fallen back today on weak retail sales and is currently near 2.61%.

Trading comment: The Nasdaq had a solid day yesterday, pushing the index back above its 50-day average.  Ditto the S&P midcap index.  With the SPX hitting new highs, the market appears to be back in rally mode and the junior indexes should play catchup to the Dow and SPX.  That said, we are sticking with the solid names that are breaking out to new highs or close, rather than trying to pick fallen angels in hopes that they will rebound.  We prefer to focus on the new leadership in the market which likely won't be the same stocks from the last phase.