Data Smudging Injects Volatility Into Markets

OK… which is it?

Is the U.S. economy at a standstill as some data-mongers are saying because the huge, hole-filled umbrella called “growth” is hovering slightly above zero?

Or is the U.S. economy booming because we are adding 200,000 to 220,000 jobs per month while there are still 5.5+ million job openings?

What have been the effects on the economy since crude oil tanked last year? Should we establish a “new normal” that takes into account both the negative and positive effects of rock-bottom oil prices?

Exports seem to be foundering a bit for the U.S. right now as the dollar seeks to get back into a lower and therefore more positive trading position. The trade deficit widened to $47.1 billion last month, in danger territory.

On a happier note, the Index of Supply Managers non-manufacturing index Tuesday grooved up to 54.5, more than the 54.2 expected. Even better news was a report that said new orders climbed to 58.5 from 53.5, an encouraging sign, indeed.

"All of a sudden we're reminded again the U.S. economy is not headed into a massive recession. That's what's new here," said Art Hogan, chief market strategist at Wunderlich Securities. 

"We're still going to battle the hurdles that we started the day with, but it looks like we're better [able] to do that battle after that print," he added.

Internationally, crude oil’s continuing softness hurt equities in Europe and in New York. A much stronger yen v. dollar helped dent the Nikkei. The only index that showed some spark was the Shanghai, which rose about 1.5%.

Aside from crude oil, weak manufacturing data from Germany hurt European stocks. Base metals were down, pulling stocks in that sector along with them.

Gold was the big winner on a day that saw silver and platinum also rise while palladium faltered. Spot gold is up almost $16 per ounce and the near-in contract gained $13.60 per ounce.

Much of gold’s gain came from those who saw the yellow precious as oversold and from haven-seekers in Europe primarily.

The U.S. 10-year bond yield hit a one-month low, indicating that investors were drawn to bond safety. By chance, West Texas Intermediate also hit a one-month low (plus one day).

What we see today is a blurry smudge of data that makes us want to sit back and meditate upon all that information that streams in from around the globe.    

We’re trying not to think like conspiracy theorists. Otherwise we’d be saying that there are vast and impenetrable flaws in the collection and print of the data.

Wishing you as always, good trading,