The economic data got worse.
The old saying “sell in May and go away’ could be changing to ‘buy in June and don’t sell soon’. The analysts who have been negative and expected the market to reverse are seeing the bulls in full control. Buying on dips has been working for several months and leading sectors like tech/social media and small caps have maintained momentum. This is a sign of a healthy market and selling in May didn’t work last year either.
The Fed hasn’t shaken up the market and traders seem to like Janet Yellen’s disposition and composure. In short, the new Fed head hasn’t rocked the boat. But why? Probably because after an extremely cold winter, the economy didn’t bounce back yet and although nominal unemployment is stabilizing, the economic data reveals the U.S. is still in grow slow mode with housing lagging and the new Fed head has no real reason to signal changes are coming. Even if she did, the market wouldn’t believe her with each new economic data point showing weakness.
Here is a brief highlight of last week’s economic news.
- The Labor Department reported last week its new Producer Price Index for Final Demand dipped 0.2 percent in May.
- Initial jobless claims increased by 4,000 to a seasonally adjusted 317,000 for the week ended June 7.
- The Commerce Department said on Thursday that retail sales rose but much less than expected. Retail sales gained 0.3 percent which was well below the 0.6 percent rise expected forecasted.
This is just a snapshot of last week and it hasn’t been a particularly hot summer yet which could keep retailers in the red until Black Friday. Keep buying during pullbacks and worry about corrections after a definitive – prolonged downturn by leading sectors.