The Day Ahead: It's a Balloon!

 | May 01, 2013 | 8:00 AM EDT
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What in Sam Hill is the deal with this crazy stock market? Macro reads are telling a tale of nasty May surprises. Earnings releases smell like a bag of trash left outside to melt on a hot, sunny summer day. We all better join an Investing 101 class held by some obscure online education institution to learn the new skills to survive.

Although on Monday I suggested that the week would begin with gusto, the market is fighting tooth and nail to remain in the green pastures. Consider these five things the market has had to deal with inside of two sessions:

  • Spain GDP is down seven straight quarters.
  • German unemployment is slightly in line with consensus.
  • Inflation in the European Union is at a three-year low, shedding light on why U.S. multinationals struggled there in the first half of 2013: No pricing power!
  • New record unemployment rate in the E.U. -- 19.2 million are minus a gig.
  • Japan's retail sales fell 0.3% in March; the consensus was at a 0.6% gain.

But I suppose a kiss of the booboo by the European Central Bank later this week will heal the wounds, right? Wrong. I continue to believe the market could fade any ECB action and completely sell off should these slow-to-move, boring-looking people stand firm in terms of policy action (policy action that may or may not reignite subpar growth six months down the line). After wrapping your head around the overseas fun stuff, consider the collective badness on our own shores:

  • Office Depot's (ODP) quarter provided nothing encouraging regarding the health of small businesses.
  • Consumer confidence advanced so severely as if to hint at a near-term, tax-check-related top. It's rather probable that gains here are not sustained, given reads on the economy on offer from more pertinent samples.

Speaking of the path ahead, the market has bid itself higher right into a non-farm payrolls report that has "surprise" (of the unfortunate type) written all over it...

Chicago PMI, April

  • 49 headline vs. 52.5 consensus, a three-year low.
  • A three-month downtrend in the employment component.
  • Sharp fall in order backlogs.

Michigan Consumer Sentiment, April. Yes, it beat, similar to the Conference Board's, however:

  • 76.4 headline vs. 78.6 March.
  • Expectations index of 67.8 vs. 70.8 March.

Empire State, April

  • 3.1 headline vs. 9.2 March; consensus 7.8.
  • New orders at 2.2 vs. 8.2.
  • Prices received declined (so why add payroll?).

Philly Fed, April

  • 1.3 headline vs. 2 in March; consensus 3.
  • New orders -1 vs. +0.5 in March.
  • Employment index -6.8 vs. +2.7 in March.
  • 140% more respondents noted lower prices for their manufactured products than higher prices (so why add payroll?).
  • Future orders plunged to 19.5 vs. 32.5 March.


  • All components of the March industrial production report weakened from February (little momentum entering April).

If you're greedy, you'll risk having your head chopped off by the Jekyll side of Mr. Market. Risk is too heightened for my blood prior to batches of VIP online press releases.

Special Note

I am meeting with Chipotle Mexican Grill (CMG) today, and I plan to leak something of interest after the powwow. Email me to score this leak.

Fun fact on Chipotle:

  • It's testing breakfast hours in two airport locations. However, only one of the locations in Baltimore is actually serving a breakfast item (a frittata, which management sure seems excited about). 

Columnist Conversations

volatility is quite low here, and we could see some downsides here in the short term. ...



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