Financial Markets: The Good, Bad and Ugly

By Todd Harrison Go figure; the financial media dutifully explained all week why this month's payroll data was poised to disappoint on a few fronts. With the S&P having closed yesterday below the all-important 1340 level, the stage was set for collective fret. So what shot does the BLS up and pull? Better than expected job growth in April (thanks, in some ways, to McDonald's (MCD) which hired 62,000 folks in one day) and upward revisions in March which have alleviated, at least for the time being, concerns that higher fuel prices served as an implicit tax on the consumer (these readings were taken prior to the commodity carnage).

(To see Michael Comeau's piece on Intel's new 3D technology, click here.)

While it's long been our view that these numbers are "massaged," the on-the-surface takeaway is the biggest monthly gain since May 2010, which should play well in the weekend press. Consistent with the A.D.D. mindset on Wall Street, that was then and this is now, and profitability resides in the ride ahead. To understand where we are, we must appreciate how we got here and this week offered a healthy dose of perspective, context, and lessons. Let's take stock of some of the fun.

(To see Stephanie Christensen's article on how Baby Boomers will grow the home improvement market, click here.)

The Good Reaction to news is always more important to the news itself. We share that in good times and bad and as it stands, despite tremendous anxiety across the asset class spectrum, the S&P is again trading above critical support at 1340. That, along with the action in the transports, offers the best technical elements in the current construct, along with the alleviation of the heretofore persistent overbought condition.

(To view Kevin Depew's article on the five things you need to know about US Dollar Drudgery, click here.)

And of course, the credit markets continue to impress and while they're not a predictive panacea, they remain the single biggest positive in global financial markets. (Watch Risk On, Risk Off: Is the Rally Over?) The Bad Deterioration under the hood, or the action in previous leadership equities and sectors, must be noted. Stocks like Goldman Sachs (GS), Google (GOOG), Apple (AAPL), and General Electric (GE) are all tracing out patterns of "lower highs" which is traditionally a cause for pause. I would also note the inability of the financials to push through the BKX 52 as an overt negative. While the leaders coming out of a crisis are rarely the same as those who enter them, this complex continues to encapsulate our finance-based global economy.

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