MARKET MINUTE

There’s a lot going on today so let’s take a brief look at some catalysts moving the markets.

• The big overnight catalyst was a rally in Chinese shares after they reported lower than expected inflation of 5.5%. Fixed asset investment for the first 5 months of the year showed a 25.8% increased which was up from 25.4% in the first four months.  This has investors easing concerns over a hard landing in China. Bank of America’ Lu Ting says “a hard landing is a low probability event”.

• Retail sales in the US came in at -0.2% which was slightly better than expected.  The year over year rate of change is 7.7%.  The underlying data was mixed according to Econoday:

“Outside of autos and gasoline, sales were mixed. The largest gains were seen in miscellaneous store retailers (up 2.1 percent); building materials & garden equipment (up 1.2 percent); and nonstore retailers (up 1.2 percent). Also rising were health & personal care; clothing; and food services & drinking places.

Tugging down were electronics & appliance stores (down 1.3 percent); furniture & home furnishing (down 0.7 percent); food & beverage (down 0.5 percent) with declines also seen in sporting goods, hobby & book stores and also in general merchandise.”

• The Producer Price Index showed a slight slowing in the rate of inflation, however, prices remained high.  The majority of the increase continues to be influenced by energy prices.  Core PPI was 2% versus last year.  On a month over month basis the rate of change was 0.2% versus 0.8% last month.  This should be in-line with the CPI data out later this week which will likely also show a decline in the rate of change.  This should help ease the Fed’s worries about any signs of dangerous cost push inflation.

• Markets are enjoying this combination of news, but the bigger news might just be that there are no negative catalysts out there today and equities are enjoying a reprieve from the vicious selling of the last few weeks.  The S&P 500 had fallen 8.3% in just 6 weeks while Chinese shares in Shanghai had fallen 15%.  Overall, the lack of negative news is giving the sellers a reason to ease up on the throttle.