Hey Folks, markets are very weak and we are currently under a Buyer strike where every rally fails. I would expect a near term rally going into the end of May but then there is a higher possibility of a move lower taking out the lows of this week as we move into June/July timeframe.
Get my take on this Week’s Round-Up;
WEEKLY SOUND BITES:
The major indexes continued its weekly losing streak as fears grew that inflation was causing consumers to pull back on discretionary spending, setting the stage for a coming recession. The DOW is down 8 weeks in a row matching its longest losing streak since 1932. At its low point on Friday, the S&P was down roughly 20.9% from its January intraday high, exceeding the 20% threshold for a bear market and placing it back at levels last seen in February 2021 before a late day rally moved it back into correction territory. Disappointing earnings and revenue results from Wall Mart, Target and Lowes spilled over into negative broader sentiment. Not helping were comments from Fed Chair “Boom Boom” Powell they would not hesitate to raise rates as much as necessary, even if it meant “some pain was involved.”
The week’s economic data offered mixed signals about whether a recession was imminent with retails sales moving higher (most attributable to higher prices) while industrial production also surprised on the upside. It should be noted that some downside surprises appeared to spark brief rallies in stock prices due to expectations longer term interest rates would be lower.
The yield on the benchmark 10-year U.S. Treasury note fell as low as 2.77% in intraday trading on Thursday, its lowest level in nearly a month as Bonds are reflecting a slowdown in economic growth expectations.
Shares in Europe pulled back amid fears of slowing economic growth and faster interest rate increases. The eurozone economy was more resilient than previously thought in Q1 with GDP growth revised higher to 0.3% from the previous estimate of 0.2%. Even so, the European Commission (EC) cut its forecast for 2022 GDP growth to 2.7% from 4.0% and raised its estimate for inflation to 6.1% from 3.5% to reflect higher energy prices…In the U.K. inflation accelerated in April to the highest level since 1982, hitting 9.0% on surging electricity and gas prices while the unemployment rate in the three months ended March 31 fell to 3.7%—the lowest level since 1974—with job vacancies exceeding the number of jobless for the first time on record.
Japan’s economic recovery lagged that of its global peers, with the country’s GDP contracting by an annualized 1% quarter on quarter during the first three months of 2022. Factors behind the contraction included deteriorating trade as import prices soared and sluggish consumer spending due to the coronavirus restrictions that had been in place. The BoJ has repeatedly said that it will continue with its massive monetary stimulus to support the post-pandemic recovery. Inflation exceeded the BoJ’s 2.0% target in April, as the core consumer price index rose 2.1% from a year earlier.
Chinese stocks rose as the central bank cut interest rates to support the country’s flagging property sector even as disappointing economic data weighed on sentiment. Economic data released last week pointed to slowing growth. Retail sales and industrial output data for April lagged estimates amid continued pandemic lockdowns reflecting China’s zero-COVID approach.
Enjoy this Week’s Update
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