FRIDAY 5/16/14; Housing Starts; Consumer Sentiment

Japan’s NIKK drops -1.4% as the dollar/yen drifts lower to 101.30. Japan’s blue-chips such as SoftBank and Sony are slapped hard over the last couple days. China markets trade flat. China’s bad bank loans are rising. Australia’s SPASX200 loses -0.6%.

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The session ends with the SPX up 7 points, +0.4%, to the strong resistance at 1878, unable to close above the critical 20-day MA at 1879. The two-day selloff ends. The Dow gains 45 points, +0.3%, to 16491. The Nasdaq moves 21 points higher, +0.5%, to 4091. The RUT is up 7 points, +0.6%, to 1103. Much of the day had the major indexes moving in unison up about +0.3% higher indicating that the robots are doing the trading today. TRAN gains +0.8%. GM -1%. DRI -4.3%. All-time record market highs are printed this week for SPX and Dow. David Tepper comments create market negativity mid-week.

For the week, the SPX is dead flat losing less than one point, -0.03%. The Dow is down -0.6%. The Nasdaq gains +0.5% on the week and RUT loses -0.4%. Telecom is the winner this week and financials the loser. XLF loses -0.8%. The drop in Treasury yields hurt the banks due to a flatter yield curve. Tech is obviously a winner with the positive Nasdaq. CSCO earnings create the oomph in tech. The retail sector is a mixed bag. WMT and KSS earnings misses cause a drag on stocks while the M earnings create lift. Iron ore prices hit a 20-month low as traders sort out China’s growth numbers and need for steel moving forward.

US Treasury note and bond yields are trending lower warning that the economy is not healthy. Investors are willing to remain in Treasuries for the perceived safety rather than invest in the stock market at all-time highs. The bond market anticipates the first Fed rate hike to occur in the October 2015 time frame but the general consensus and even the Fed itself is currently targeting April-July 2015. The bond market is typically correct so the economy is likely weaker than thought but plenty of bullish traders and analysts say it is different this time and the stock market is correct and the bond market is wrong.

European note and bond yields are creeping higher over the last couple days in Europe. The Spain and Italy yields are above 3% moving higher hinting that traders are becoming concerned over the slow pace of Europe’s recovery. The easy money, mainly cheap yen created by the BOJ, that pumped European stock and bond prices artificially higher over the last year, is losing its punch.