/ May 16
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Friday:
Building Permits Prel (1.45M exp.)Michigan Consumer Sentiment Prel
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Friday:
N/A
Daily Briefing
*The stock market exhibited mixed action yesterday; the market started the session with losses at the index level, but the Dow Jones Industrial Average (+0.7%) and the S&P 500 (+0.4%) closed with gains;
*There was an emerging view that stocks are due for a period of consolidation after a big run (the S&P 500 is up +6.3% in May so far), but that still hasn't materialized in a meaningful way; the continued resilience acted as its own upside catalyst as yesterday’s session progressed;
*For SPY’s technical analysis, we would rather focus on potential support levels rather than resistance; the first, and most logical level of support should be at around $568 (S1), where the trade truce breakout occured; next, we should see buyers step in between $543 and $550 (50-DMA and lower trend-line) purely on technical considerations; closing below $543 would be a signal that the rally was a “bear market rally” which failed to confirm support, and would most likely retest the lows ($513 and below);
*The MACD signal remains extended, as the rally did not let up at the index level;
*There was a bit more buying in Dark Pools yesterday, with the average index climbing into neutral territory for the top 20 S&P 500 stocks (above 45%); buyers favored high risk stocks like NVDA and TSLA, while META was also among those well bid; healthcare stocks LLY and UNH were among those distributed, with no sign of any buy-the-dip interest in the battered sector just yet;
*A drop in market rates also contributed to the underlying positive bias; the 10-yr yield settled seven basis points lower at 4.46%, and the 2-yr yield settled eight basis points lower at 3.97%; this price action was driven in part by a cool Producer Price Index report for April (-0.5% vs consensus 0.3%); it was just one report, though, on an economic data-heavy day;
*The PPI decrease was the good news; the bad news is that the prior month was revised up to unchanged from a 0.4% decline; the big drop in the index for final demand was driven by a -0.7% decline in the index for final demand services (the largest decline since December 2009);
*Over 40% of that -0.7% decline was driven by margins for machinery and vehicle wholesaling, which dropped -1.6%; that suggests wholesalers were likely absorbing some tariff impacts, which is good for the end customer but not necessarily for company earnings;
*On a yearly basis, the PPI inflation eased to 2.4% in April, the lowest since September 2024 and slightly below forecasts of 2.5%;
*The calendar also included April reports for retail sales, and industrial production; weekly initial and continuing jobless claims; and May reports for the Philadelphia Fed Index, Empire State Manufacturing Survey, and NAHB Housing Market Index that, collectively, were mixed relative to expectations;
*Total retail sales increased +0.1% month-over-month in April (vs consensus +0.2%) following an upwardly revised +1.7% (from +1.4%) in March; the pace of spending on goods decelerated in April, speaking to the tariff frontrunning evident in the strong sales for March and reflecting the consumer's cautious mindset following "Liberation Day" and the stock market's volatility;
Sector ETFs relative-to-SPY returns for yesterday
*Initial jobless claims for the week ending May 10 were unchanged at 229,000 (vs consensus 226,000), while continuing jobless claims for the week ending May 3 increased by 9,000 to 1.881 million;
*The initial jobless claims filings -- a leading indicator -- still reflect an otherwise solid labor market that will remain supportive of consumer spending, albeit perhaps at a slower pace in the face of higher prices;
*Total industrial production was flat month-over-month in April; manufacturing output was weak; excluding motor vehicles and parts, manufacturing output still decreased -0.3%, presumably with the tariff uncertainty holding back total output;
*The Nasdaq Composite (-0.2%) lagged its peers through the entire session, reflecting pressure from losses in some mega caps;
*Dow component UnitedHealth (UNH, -10.9%) was another notable laggard following a Wall Street Journal report that the DOJ is investigating the company for possible criminal Medicare fraud; UNH said it has not been informed of any such investigation;
*Walmart (WMT, -0.5%) was also in the headlines after it topped the quarterly consensus EPS estimate, yet its FY26 EPS guidance was conservative-looking relative to the consensus estimate, and the company warned that consumers are likely to see higher prices starting later this month and certainly in June due to the tariffs;
*TLT bounced off support at $85.6, and is just about to exit oversold conditions; we would not be surprised to hear more rhetoric from Washington designed to support bonds at this stage;