Friday, May 06, 2011
Stock Market Commentary:

Stocks and a host of commodities were smacked in the first week of May as they pulled back from egregiously over extended levels. From our vantage point, the market rally is under pressure due to the lackluster action in the major averages and so many leading stocks.

Monday-Wednesday’s Action: Bin Laden’s Toast; Markets Fall

Late Sunday night President Obama announced that U.S. forces killed Osama Bin Laden in a private compound in Pakistan! On Monday, stocks opened higher, but fell by the close, after the latest round of economic and earnings data topped estimates. In other news, silver plunged this week after CME Group Inc. (CME) raised margin requirements (the amount of cash needed for speculative positions) for the red-hot commodity.
News on the economic front topped estimates, the Institute for Supply Management’s (ISM) manufacturing index slid to 60.4 in April, down from 61.2 in February. The Street was expecting a reading of 59.5. March’s total also topped the boom/bust level of 50 which signals expansion.
On Tuesday, stocks slid as the latest rally cooled and investors digested the latest round of earnings and economic data. U.S. factory orders topped estimates in March as demand increased for machinery and computers which bodes well for the economic recovery and further business spending. The Commerce Department said factory orders rose +3%, a fifth consecutive increase, after a +0.7% gain in February. Meanwhile, the latest round of earnings data was mixed to slightly stronger which also bodes well for the ongoing recovery.
On Wednesday, stocks were smacked after ADP, the country’s largest private payrolls company, said U.S. employers added +179,000 in April which missed the Street’s forecast of +198,000. 

Thursday & Friday’s Action: Global Markets Continue To Pullback

On Thursday, global capital markets continued their week-long pullback to consolidate their recent and robust gains. Before Thursday’s open, the Labor Department said U.S. jobless claims rose by +43,000 to 474,000. A separate report showed U.S. productivity slowed in the first quarter as labor costs rose.  However, a slew of widely followed commodities (i.e. gold, oil, silver, etc.) plunged in heavy trade as the U.S. soared.
Before Friday’s open, the Labor Department said U.S. employers added +244,000 new jobs in April which was the largest monthly gain in 11 months. The report also showed that the unemployment rate rose slightly to 9%. 

Market Outlook- Rally Under Pressure

From our point of view, the market rally is under pressure which suggests caution is paramount at this stage.  Looking forward, the next level of support for the major averages are their respective 50 DMA lines. The rally remains in tact as long as support holds. If you are looking for specific help navigating this market, please contact us for more information.