Weekly Market Commentary

The Markets
The U.S. markets sounded a little like Rodney Dangerfield last week: They get no respect. All the while the vast majority of economic news and corporate earnings continue to come in strong. Sure, new jobless claims were a little higher than what we would have liked to see, but two major inflation statistics, the Producer Price Index(PPI) and the Consumer Price Index both show there is no threat of inflation at the moment.
The PPI dropped an unexpected -0.1% in April. This was the second decrease in three months according to Bloomberg. Even core inflation at the wholesale level remains very subdued.
For the CPI, we also got good news as the cost of goods and services at the consumer level came in at the same -0.1%. This was the first drop since March of 2009. This helps take the pressure of the Fed to increase rates due to inflationary concerns. Low interest rates will help continue to fuel the growth of this recovery.
The market has given up all its gains for 2010 and then some, the volatility index has doubled over the last few weeks, I tell you....the market gets no respect.
But seriously, what now? Well, it looks like we have gotten the first official 10% correction since this bull rally started in March 2009. What happens now will tell us if this is just a correction or the beginning of a more serious pullback. Some sectors are showing more signs of breaking down than others.
If we were getting bad news from company earnings, or we were seeing significantly higher inflation figures, I would be a lot more concerned. But things look good out there. You have to remember how much corporations cut expenses to the bone. Even though we still have problems to deal with, we are not going into them as we did at the end of 2007. Companies are not bloated with inventory or over-staffed as they were. This enables them to stay lean and profitable.


If you or anyone you know is concerned about the last few weeks in the markets, please drop us a note or give us a call. I'd be glad to discuss it in more detail with you.

More on Europe

Last week I mentioned my concern for the U.S. bailing out more European countries when we have enough of our own problems to deal with. Well, last week, the Senate voted 94-0 to approve a measure making it harder to deploy U.S. funds in rescuing foreign governments. The amendment was attached to the financial regulatory overhaul bill. The bipartisan measure requires the administration to certify that any future loans made to the International Monetary Fund (IMF) would be fully repaid. If there is not certification, the U.S. representative tothe IMF would be required to oppose the lending, according to the Wall Street Journal.