The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
It begins?
Futures were off about 10 points in the premarket, nothing significant. They dropped substantially once we saw April ADP (62k vs 115k est & 147k prior revised from 155k) and Q1 Advanced GDP (-0.3% vs -0.2% est & 2.4% prior). Futures fell 50-plus points and Treasuries rallied significantly. The market opened down 70 and worsened in the first 30 minutes. Dip-buyers went to work at 10 AM and repaired all the damage and then some.
Maybe it was month-end flows. Maybe it’s the market’s willingness to ignore bad data. It doesn’t make a difference for the moment. The market is bullish and it’s going to take quite a whack over the head for that to change.
Let’s talk about that early morning data. It sure looks like the weakness we’ve all been anticipating has started to show up. GDP will get change a few more times but when the first print is a contraction after a 2.4% in the prior quarter, that should mean something. The ADP labor data also speaks volumes. Maybe the market will only care when they see the April non-farm payrolls data (+135k est vs +228k prior) on Friday?
I think we may have some serious sensitivity to tomorrow’s weekly jobless too (+223k est vs +222k prior).
The questions looming are the big ones we’ve already discussed.
Is a recession coming?
How big might it be?
Is the market priced for it?
I have my answers and the market’s behavior implies it disagrees with mine considerably. Normally, I’d defer but right now I think the market is delusional.
See you tomorrow.
-Mike
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