The S&P 500 has been making new all-time highs on a regular basis over the past few weeks.
As such, it would be incorrect to say market action is bearish…
That’s just not the case.
That doesn’t mean everything is hunky-dory, though. So we’ve put together the top stock market movers this week… And you should keep an eye out for these names…
A big concern we have is the snail’s pace at which the SPDR S&P 500 ETF Trust (NYSEArca: SPY) is making these new all-time highs.
Slow, slower and, recently… slowest.
Any positive economic data point, however, could serve as an EPO shot in the arm for out-of-breath markets cycling toward the finish line.
And there are three such factors — two of which come out Tuesday — we’re looking at this week that could make or break near-term action.
May retail sales data comes out Tuesday at 8:30 a.m. EDT, with the market expecting a 0.4% rebound off of April’s 0.8% decline.
That’s only a modest improvement at best. But with one major holiday nestled in there (Memorial Day), it’s possible that travel expenditures plus entertainment costs — as well as summer wardrobe purchases — could push toward a beat.
An increase in retail sales would essentially mean an increase in consumer spending, which comprises over 60% of U.S. gross domestic product. And in turn, a beat would mean the country’s overall economy continues to improve.
Inflation has been a consistent theme among the talking heads in the mainstream financial media over the past few weeks. This report could indicate inflation’s future is one of the top stock market movers this week.
The last Consumer Price Index (read: inflation) figure of +5% year-over-year was the highest print in darn near 13 years. And although markets shrugged it off, pundits are clearly spooked by what the Federal Reserve deems a “transitory” figure.
Well, Tuesday’s release of Producer Price Index data — a leading indicator for the Consumer Price Index — should give us a look into what the near-term future of inflationary pressures looks like.
PPI Final Demand and PPI Ex-Food and Energy are both estimated to come in at or near that 5% level. Our projections are fairly flat, as commodity inflation (which is the leading indicator for PPI) has begun to slow a bit.
But in the event levels come in much higher, expect the financial media to sound all the panic buttons it can find.
Frankly, either situation likely means GDP will continue to increase for at least a month. But the talking heads get more eyeballs when the market is volatile, so expect them to reinforce that kind of behavior.
All this talk about inflation doesn’t appear to have gotten through to interest rates, as they’ve been downright lackluster for some time now.
Why is that?
Well, if you pay any attention at all to the Commodity Futures Trading Commission (CFTC) Commitment of Traders (COT) reports, then you may be aware that hedge funds and other money managers have been piling into bonds over the past month or so.
Source: CFTC, Fortune Research
They’ve been piling in so much, in fact, that their net long position is nearly 2.5 standard deviations away from “normal.”
Eventually, those positions get unwound, and that money flows out into the market.
When it does, expect bonds to sell off and interest rates (possibly the U.S. dollar, too) to absolutely RIP higher.
In turn, that means anything negatively correlated with interest rates will head lower.
Source: Fortune Research
In short, that means gold and the tech sector — possibly also the broader market — are most likely to sell off on that rip.
And if gold’s action this morning — collapsing to $1,844 per ounce before rebounding — tells us anything, it’s that a down move in rates is expected.
Source: Fortune Research
So stay frosty out there, and keep an eye on these stock market movers this week… It could get bumpy.
All the best,
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