On Saturday I said this week’s unusually heavy week of important economic reports in the U.S. and globally would likely decide the market’s direction for a while.
But so far, even though the reports have been startling in some cases, the market has shrugged them off, and gone into idle mode. The Dow is up 40 points, or 0.3% for the week. The Nasdaq is down 0.3%, and the S&P 500 is unchanged.
Yet some of the reports have been dramatic. Among them, the Chicago PMI Index plunged from 63.3 in March to 56.2 in April. The Dallas Fed Mfg Index plunged from 10.8 in March all the way into negative territory at -3.4 in April. Construction Spending was up only 0.1% in March versus the consensus forecast of an increase of 0.5%, AND the previously reported decline of 1.1% in February was revised to a decline of 1.5%. On the positive side the national ISM Mfg Index rose to 54.8% in April from 53.4 in March.
Then yesterday, the ADP Employment Report was released and showed only 119,000 new jobs were created in the private sector in April, a major miss of the consensus forecast of 175,000, and more importantly a big decline from the average 200,000 monthly new jobs in the 1st quarter. And Factory Orders fell 1.5% in March, the biggest monthly decline in 3 years.
Meanwhile, outside of the U.S., the reports this week have been that Canada reported its GDP growth unexpectedly fell into negative territory at -1.2% in February versus forecasts of at least meager growth of +0.1%. The United Kingdom reported its PMI fell to 50.5 in April from 51.9 in March. (The U.K. had already reported negative GDP for the last two quarters, putting it officially in a recession). The 17-nation euro-zone’s PMI fell to 45.9 in April from 47.7 in March (a number below 50 indicates recessionary contraction). Even the euro-zone’s strongest economy, that ofGermany, saw its PMI fall to 46.2 in April from 48.4 in March. France’s PMI remained in negative territory at 46.9.
I found this chart, which first appeared on Business Insiders, to be very interesting.
It shows how similar the current decline in Germany’s PMI is to its declines prior to the global market’s 1998 mini-crash, the 2000–2002 bear market, and the 2007-2009 bear market.
Negative Divergences Continue.
The Dow, S&P 500, and Nasdaq have recovered all of their losses from last summer’s correction, and gone on to nominal new highs.
But not some of the broader indexes, which still remain below their peaks of last April.
And then there is that negative divergence of most of the other major economies of the world.
To read my weekend newspaper column ‘The Fed Will Come To the Rescue But Deliberately Late’ Click here.
Subscribers to Street Smart Report: A hotline from last evening, and the in-depth Mid-Week‘U.S. Market signals and recommendations’ report are in the subscribers’ area of the StreetSmart Report website from yesterday.
Images: Flickr (licence attribution)
About The Author
Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily Internet blog at www.SyHardingblog.com. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!