The Federal Reserve Bank of Philadelphia’s general economic index fell to minus 5.2 in May from 1.3 the prior month, and jobless claims jumped by 32,000 to 360,000 in the week ended May 11, exceeding all forecasts in a Bloomberg survey of economists. Further, an important inflation gauge showed the cost of living in the U.S. fell in April for a second month.
Equities: Once again, even in the face of lackluster economic data today, the U.S. equity markets are marching higher, with the JUN13 E-mini S&P futures trading up 3 points from yesterday’s close. This morning, this market is trading at 1657. It looks like some resistance could show up at 1665. If the markets got up to 1665, we could see a pullback from there. This market is obviously very strong though. This is a classic sign of a bull market: Shrugging off bad news to rally higher.
Bonds: Mainly because of the lackluster economic data this morning, especially combined with the inflation data, the U.S. bonds have reversed course from a recent downtrend. The U.S. JUN13 30-year bond is trading up more than 1 point today to 145’08. With this data this morning not inciting more bond selling, we would not be surprised to see the bonds range from 143-147 before the next key jobs/unemployment report comes out in a few weeks in June. If this jobs number comes out strong once again and the unemployment number ticks downward again, this likely could give the bond market a reason to go down again and bring yields higher.
Currencies: The U.S. dollar is having a slight retracement against the pound, euro and yen, but is still strong vs. the Aussie dollar. The yen is currently above our key pivot of 97.60, thus above here we believe the yen will have a short covering rally. The Aussie dollar looks weak to us, as it is not rallying with other FX peers. This currency could head lower.
Commodities: Natural gas fell 3% after a report from the U.S. Energy Information Administration showed natural gas supplies rose more-than-expected last week. Corn futures (JUL13) are down more than 1% today as well. We focus more on gold futures. The gold market has had a lot of trouble staying below a key resistance area of $1,475-$1,480. A key level below the current price is $1,340. Gold is down around $8 this morning, trading at $1,388. We don’t necessarily believe gold is going to $1,340 tomorrow, but would not be surprised to see gold gradually approach that key level.
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