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S&P 500 Shakes Off Bad Economic Data in Late Rally


Today's financial recap and tomorrow's financial outlook.

Global markets took a breather on yet another round of bad US economic data.

While first-quarter earnings season was better-than-expected, domestic economic data has continued its weak trend, with the Bloomberg Economic Surprise Index still hovering at levels not seen since the 2008-2009 financial crisis.

Industrial production dropped 0.3% in April, while economists were expecting a flat reading. Capacity utilization was 78.2%, fractionally below consensus. Manufacturing production was also weak, coming in flat vs. the 0.2% expected.

The University of Michigan Sentiment Index was a major disappointment at 88.6, down from 95.9 last month. Economists surveyed by Bloomberg expected the reading to stay at 95.9.

However, thanks to a late rally, the S&P 500 managed to squeeze out a 0.1% gain to finish at 2122.73, less than four points from the all-time high of 2125.92.

The US dollar fell against the euro and Treasury yields pulled back as presumably, the new data supports the notion that the first-quarter economic slowdown is extending into the second.

The Fed has been calling the first-quarter weakness "transitory," but that notion is looking increasingly wrong. Most market observers expect a September or December rate hike, but it's likely that more will look towards 2016.

The drop in yields gave support to bonds, utilities, real estate, and other interest-rate sensitive groups.

Financials, whose net interset margins would increase with higher rates, suffered.

Netflix (NFLX) bucked the weak action in the NASDAQ Composite, rallying 4.5% to $613.25 on news reports that it may be entering China through a partnership with a company backed by Jack Ma.

Nike (NKE) traded to a new all-time intraday high at $105.03. The stock finished at $105.01.

European markets also sagged on the weak US data, with Germany's DAX down 1.0%.

This was despite a sharp pullback in European government bond yields.

Monday's FinanciSal Outlook

The domestic economic calendar is pretty light, with the April NAHB Housing Market Index being the lone data point being reported. The Fed's Evans and Meisler will give speeches at 2:00 a.m. ET and 4:00 p.m. respecitvely.

Over the weekend and into early Monday, we'll see China property prices and foreign direct investment and Swiss retail sales. On Monday evening, the Reserve Bank of Australia will release its May meeting minutes, and the Reserve Bank of New Zealand will announce 2-year inflation expectations.

There are no major companies reporting earnings, though momentum traders will be watching JA Solar's (JASO) numbers, which will be delivered before the open.
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