Markets Tank As Global Economy Slows

Wednesday, June 01, 2011
Stock Market Commentary:

Stocks and a host of commodities were smacked on Wednesday after manufacturing data slowed markedly across the globe, Greece’s debt rating was cut even further into junk status, and jobs data disappointed in the U.S. Stocks gave back Tuesday’s gains and fell back into the multi month downtrend which suggests more sluggish action lies ahead. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly.  From our vantage point, the market is back in a correction as the major averages are now flirting with their multi-month upward trendlines.

Global Manufacturing Slows, Greek Debt Slashed, & Dismal Jobs Report In the U.S.

Manufacturing growth slowed from all corners of the globe in May which added to concerns that the global recovery may be slowing. China and Europe’s purchasing managers’ index showed the slowest rate of growth in nine and seven months, respectively. U.S. factory growth was anemic, falling to the lowest level in one year while manufacturing growth slowed to a virtual standstill in Russia, Poland, and Hungary. Moody’s rating agency slashed Greece’s credit rating further into junk territory on Wednesday which led many to question the healthy of the euro.

In other news, ADP, the U.S.’s largest private payrolls company said US employers added fewer jobs than expected in May. The report showed payrolls increasing by +38,000 which was the smallest increase since September 2010 and much lower than the Street’s estimate for an increase of +175,000. Some of the factors that are threatening the global recovery are: rising oil prices, aftermath of Japan’s earthquake, Europe’s ongoing debt crisis, and the age of the recovery (growth tends to be strongest in the early stages of a recovery before leveling out as the recovery losses steam).

Market Outlook- Market In A Correction

From our point of view, the market is back in a correction now that all the major averages closed below their respective 50 DMA lines and downward trendlines. Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. The next level of resistance is their respective 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.


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