US markets got off to a strong start today after they averted three consecutive lower closes on Friday, but the markets had a nasty reversal in the afternoon and gave back a full percent worth of gains. Yesterday, US markets were closed for Memorial Day while European and Asian markets remained open. The Japanese Nikkei Index fell 3.22% in Monday's trading and European indexes finished in positive territory.
The S&P/Case-Shiller index of home prices showed the biggest annual rate of gains in the past seven years. The 20-city composite index for March rose 10.87% from last year, more than the 10.20% consensus estimate and up from the prior month's 9.35% gain. The Richmond regional manufacturing survey rose to a -2 reading in May, up from -6 last month. The Dallas regional manufacturing survey rose to a reading of -10.5 from -15.6 the month prior. Both surveys were affected by rising activity associated with last month's decline in inventories. The stand-out was the large gain in consumer confidence, up to 76.2 in May from 69.0 last month. This reading was at a five-year high, but given the large rally in US equities, the correlation should come as no surprise.
Transportation stocks underperformed noticeably with stocks like FedEx
(NYSE:FDX) remaining in negative territory throughout the day. Utility stocks and REITs also continued to underperform the broader market. Heavily shorted stocks like Tesla
(NASDAQ:TSLA) continued to soar on a bullish note from Goldman Sachs analysts. Treasuries continued to remain under extreme pressure as agency mortgage-backed securities (MBS) underperformed severely and dragged the rate structure down as a whole.
Tomorrow's Financial Outlook
There will be no major economic data released tomorrow in the US. The Mortgage Brokers Association will release its weekly home purchase and refinancing index in the morning. The Treasury will also auction $35 billion of 5-year notes.
Global economic data that will be released tomorrow includes German employment figures, German consumer inflation, and the rate decision from the Bank of Canada. The German unemployment rate is estimated to stay unchanged from the month prior at 6.9% in May. Germany's consumer inflation for May is expected to tick up to an annual rate of 1.3% from 1.2% last month.
Notable earnings reports for tomorrow include Chico's
(NYSE:CHS) and The Fresh Market
No positions in stocks mentioned.
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