The May jobs report has raised doubts about the U.S. economy's
growth momentum. It is perhaps premature to mark down second
quarter GDP growth expectations solely based on last week's
disappointing jobs numbers, but that is the most likely direction
revisions will take should data continue to disappoint in the
coming days.
Unfortunately we don't have much to look forward to on the
economic calendar this week that could give us more visibility on
this key issue. Today's Factory Orders report coming out a little
later will not help much in that effort, though Tuesday's
service-sector ISM reading is about the only top-tier economic
report on deck this week. We will most likely have to wait another
few weeks before we see the June data coming out at the start of
next month.
When you combine these renewed growth worries about the U.S.
economy with the already underway Chinese slowdown and ever present
European drama, we get a sense of the unsettling backdrop for
stocks going forward. If GDP growth expectations start coming down,
it will not take much to prompt downward adjustments to earnings
expectations. A number of major dates on the European calendar,
ranging from Greek elections to another supposedly significant
summit meeting towards the end of the month, will keep market
participants on edge.
It appears to be becoming a seasonal pattern for us. We start
the year with high hopes for the economy and the market, but the
mood starts going sour at the onset of Spring. It happened like
that in the last two years and this year is shaping up to be not
much different either. Typically Bernanke will come to the market's
rescue. But what good would more bond purchases do this time with
treasury yields already at record low levels? The Fed's Operation
Twist is on track to end soon and all eyes will be on the central
bank to announce something similar when they meet later this
month.
Factory Orders
for April are scheduled for release today at 10:00 AM EST and are
expected to increase by 0.2% following the March decrease of 1.5%
to $460.5 billion.
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