Our American Girl Likes Bad Boys

Our American girl is higher today on a modest adjustment to GDP and jobless claims flow, and despite a tailing off of housing activity. Overall, today’s reports were convincingly negative, but apparently bad is a good thing in a market that fears the Fed. She likes the bad boys. The SPDR S&P 500 (NYSE: SPY) is up a half of a point through noon, with the SPDR Dow Jones (NYSE: DIA) trailing and the PowerShares QQQ (Nasdaq: QQQ) leading the way up 0.7%.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Economic Events

The First Quarter GDP revision was published this morning and offered a tenth of a point downward adjustment to a new growth rate of +2.4%, versus the initially reported growth rate of 2.5%. Economists expected the initial growth rate to persist into this revision, but the falloff was marginal nonetheless. The Greek is more concerned about growth into Q2, considering that the Fed’s Math Just Doesn’t Add Up in its forecasting for this year. See also our more cynical blog discussion on the topic here – The Fed’s Funny Math.

First quarter growth still managed to exceed the dismal fourth quarter 2012 pace of +0.4%. The payroll tax break expiration and the Sequester spending cuts have had meaningful impact upon our economy, along with the heavy weight of Europe. I’m looking for a gross failure this year with regard to economists’ expectations and what reality will unfold. The range of economist expectations extended from 2.3% growth to 3.3% for Q1 initially, exposing their hopeful tendency.

Pending Home Sales data was reported this morning. This is an important early indicator for real estate, but it only increased by 0.3% in April, versus economists’ expectations for a 1.4% increase. The index measures contracts signed in the existing home market (not new homes). This small increase in April matched against the March increase of 1.5%. Yesterday, we warned that rising mortgage rates were threatening to derail the housing recovery.

Weekly Initial Jobless Claims were reported for the period ending May 25, and showed weekly claims rose by 10K against the revised prior result, to 354K. The four-week moving average for jobless claims rose 6,750 to 347,250. This figure is likely to increase further next week, as a low result falls off the moving average; though the period will also probably show some impact from Memorial Day (seasonal adjustments are never perfect). The purge that occurred in labor after the last and very deep economic recession stabilized the situation somewhat, giving us some cushion against future recessionary impact.

Bloomberg’s Consumer Comfort Index deteriorated a bit this past week. The most regular measure of the consumer mood edged down 0.3 points this week and reached a new mark at -29.7. Popular opinion lately, as expressed by CNBC anyway, seems to be that consumers are confident. The same fact has showed up in the latest monthly measures of mood. However, I think this is a temporary anomaly resulting from seasonal upswing on human optimism. The reality of the situation is that Americans are paying more taxes on their paycheck this year versus last year, and too many Americans are still unemployed and unaccounted for.

Overseas Markets

EUROPE	11:50 AM	ASIA/PACIFIC	CLOSE
EURO STOXX 50	+0.5%	NIKKEI 225	-5.2%
German DAX	+0.8%	Hang Seng	-0.3%
CAC 40	+0.6%	S&P/ASX 200	-0.9%
FTSE 100	+0.5%	Korean KOSPI	-0.1%
Greek ASE	-1.4%	BSE India SENSEX	+0.3%

Japan took center stage again today overseas, with the NIKKEI 225 dropping more than five points. This followed a sharp decline yesterday, which built upon last week’s dive. Abe economics is in question, though the Japanese market is still higher since he unveiled his plan to stoke growth.

Commodity Markets (11:54 AM ET)

WTI Crude	+0.7%
Brent Crude	+0.2%
NYMEX Natural Gas	-2.8%
RBOB Gasoline	+0.6%
Gold Spot	+1.4%
Silver Spot	+2.1%
COMEX Copper	+0.5%
CBOT Corn	-1.3%
CBOT Wheat	-1.7%
CBOT Soybeans	-0.6%
ICE Cocoa	+0.1%
ICE Sugar	+0.4%
ICE Orange Juice Conc.	-0.4%
CME Live Cattle	-0.2%

The EIA’s regular Petroleum Status Report, usually reported on Wednesdays, was reported today instead due to the holiday. This data for the week ending May 25 showed crude oil inventory increased by 3.0 million barrels, and remained above the upper limit of the average range for this time of year. We have entered the summer driving season, so draws on gasoline inventory should be the norm moving forward. Total motor gasoline inventory decreased by 1.5 million barrels, but was in the upper half of the average range.

The EIA’s Natural Gas Report was reported today as usual. The latest report covering the period ending May 24 showed working gas in storage increased by 88 Bcf. Stocks were 664 Bcf less than last year at this time and 88 Bcf below the five-year average for this time of year.

Corporate Events

The Sanford C. Bernstein Strategic Decisions Conference highlights presentations by Hewlett-Packard (NYSE: HPQ) and Tyco International (NYSE: TYC). The Nomura Global Media Summit brings news from Time Warner (NYSE: TWX) and Walt Disney (NYSE: DIS). The Deutsche Bank dbAccess Health Care Conference brings news from Amgen (Nasdaq: AMGN). EMC (NYSE: EMC) is having its “Expanded Capital Allocation Strategy Conference Call”.

The day’s earnings schedule highlights reports from Costco (Nasdaq: COST), Joy Global (NYSE: JOY), Pall Corp. (NYSE: PLL), Big Lots (NYSE: BIG) and China Ming Yang Wind Power Group (NYSE: MY). Also look for news from China Gerui Advanced Materials (Nasdaq: CHOP), Copart (Nasdaq: CPRT), CorVel (Nasdaq: CRVL), dELiA’s (Nasdaq: DLIA), Envivio (Nasdaq: ENVI), Esterline Technologies (NYSE: ESL), Express (Nasdaq: EXPR), Fred’s (Nasdaq: FRED), Golar LNG (Nasdaq: GLNG), Golar LNG Partners (Nasdaq: GMLP), Guess (NYSE: GES), Hanwha Solarone (Nasdaq: HSOL), Hellenic Petroleum (ELPE.AT), Krispy Kreme Doughnuts (NYSE: KKD), Lion’s Gate Entertainment (NYSE: LGF), MGC Diagnostics (Nasdaq: MGCD), Modine Manufacturing (NYSE: MOD), OmniVision Technologies (Nasdaq: OVTI), Palo Alto Networks (Nasdaq: PANW), QAD (Nasdaq: QADB), Sanderson Farms (Nasdaq: SAFM), Ship Finance International (NYSE: SFL), Splunk (Nasdaq: SPLK), Uroplasty (NYSE: UPI) and Yingli Green Energy Holdings (NYSE: YGE).

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