EmailSell in May and go away? Hah! So far, market participants have scoffed at such a notion. Entering this week, the S&P 500 is up 2.3% for the month.
The early indication is that the market will give back a small portion of that gain when the opening bell rings. The S&P futures are currently trading 0.2% below fair value.
A weekend report in the Wall Street Journal that said Fed officials have mapped out a strategy for tapering the Fed's asset purchase program has been cited as a contributing factor for the early disposition. That article added that the timing for tapering the asset purchases is uncertain.
Basically, the article says what the market already knows. It should come as no surprise that Fed officials are discussing how to taper/exit and it should come as no surprise that the timing for such a move is uncertain.
There is news here, but it doesn't strike us as groundbreaking news. Nevertheless, after the run the market has had, any talk of the Fed tapering its purchases provides as good an excuse as any to take some money off the table. That's really all it is, too -- an excuse.
Shifting gears, the Retail Sales report for April was released this morning and it was better than expected. Total retail sales increased 0.1% (Briefing.com consensus -0.3%) while sales, excluding autos, declined 0.1% (Briefing.com consensus -0.3%).
The valid excuse that can be offered for the relatively weak headline numbers is that gasoline station sales were down 4.7%. Every other sales category, however, with the exception of food and beverage stores (-0.8%) and health and personal care stores (-0.1%), saw an increase in sales for the month. Core sales, which exclude autos, building materials, and gasoline, jumped a robust 0.5%.
Given the 0.3% decline in aggregate earnings in April, today's report qualifies as a positive surprise. It also suggests that much of the spending in April came out of personal savings. That could set the stage for future disappointment if aggregate earnings don't improve.
The S&P futures rightfully pared some of their losses after the Retail Sales report was released.
The economic calendar should be more influential this week than it was last week since it will also feature the PPI, Industrial Production, CPI, Housing Starts, Leading Indicators, and Initial Claims reports along with some regional manufacturing and consumer sentiment surveys.
At the moment, the Treasury market remains on the defensive as the 10-year note is down another eight ticks, bringing its yield up to 1.93%. No excuses there. The safety trade is less appealing with stocks continuing their impressive run.
