(Marco Bonelli) When all news is good news!
Sure, good news is good news. ISM Manufacturing and weekly jobless claims is good news (sort of) and Q1 earnings in general fall into the good news category. The 8.25% decline in gasoline prices since the peak from March 26 is good news and positive for the consumer, airlines, truckers etc.
Then you have bad news, but depending what you look at and how you look at it, could turn out to be good news, too!
- ADP Employment Change, a bad number, but only a pay-back to an extremely strong Q1 and the 3-month moving average still shows more than 200k private jobs created.
- Factory Orders, another bad number, but with -1.5%, it was better than the -1.6% expected (but you have to ignore the lower downside revision for February)
- Nonfarm Productivity, a weak number but with -0.5% also better than the -0.6% expected ("Breaking News: Nonfarm Productivity falls less than feared!") but only if you don't take into account the much lower Unit Labor Costs (which is good in itself but shows that top-line "production" was weaker than expected!)
- Initial Jobless Claims, only 365k compared to 379k expected - really good news! Well, last week's number was again revised up, as it was the last several weeks, so overall, no big gains at all unless you perceive the "posting low but revising higher later" game as real progress or good news.
- Retail Same-Store-Sales for May were mostly mixed to slightly disappointing with heavy-weights like COST, GPS, KSS, M and TGT posting slower sales than expected. No problem, the winter was warm, Easter came early and Mother's Day is late, so April was expected to be weaker after a strong March, that's why the bad news is good news.
The Dow Jones managed to close above its March and April highs the second day in a row, the SPX is fighting for the 1400 level and appears to win the battle for the moment, the Dow Jones Transportation Index continues to outperform (and is moving closer to the 5400 high from February and March), the Nasdaq outperformed, trading well above its 50day MA and the Russell 2000 also closed above its 50day MA after a gap-down opening below that level-all developments that suggest a better market ahead.
While the market engine might run in low gear today ahead of the highly important labor report for April, don't forget:
- Better than expected payrolls, good news / worse than expected payrolls - no surprise because the ADP Report already indicated it, expectations were low anyway, April is not such an important month, and a really bad number will have Ben Bernanke working assiduously behind the curtains, constructing the next tool out of his unlimited tool-box.
As the market obviously likes to see new highs, let's embrace and not fight it!
Trade well.
(Marco Bonelli is the Managing Director of International for CL King & Associates in New York. The opinions expressed are his own.)
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