THE MONTH IN BRIEF

May brought more record closes for the Dow, more
affirmations of the housing comeback, more household confidence, and certainly
more volatility as investors wondered if the Federal Reserve might soon do
less. The major concern of the month was how quickly and dramatically the Fed might
wind down its easing effort. Commodities struggled against a strengthening
dollar; domestic indicators were a mixed bag. Still, there was enough optimism to
send the S&P 500 2.08% higher for the month.1

DOMESTIC ECONOMIC HEALTH

The May 1 Fed policy minutes (released May 22) stated that “a number”
of Fed officials were open to reducing the scale of QE3 as soon as June. As
easing has driven this bull market perhaps more than any other factor, this unnerved
Wall Street. If economic indicators improved in spring, would the Fed stimulus
diminish?2

As it happened, some key economic indicators
faltered. Consumer spending slipped 0.2% in April (consumer incomes were flat
in that month), and the closely watched Institute for Supply Management manufacturing
PMI hit its lowest level in four years in May  – 49.0, indicating sector contraction. The
Labor Department said the economy generated 165,000 new jobs in April, in line
with the decent but unspectacular hiring growth seen in the past year (169,000
new jobs per month); unemployment ticked down to 7.5%.3,4

What really improved in May was consumer
confidence. The Conference Board’s May poll rose to 76.2 from the 68.1 reading
in April; the final May consumer sentiment survey from the University of
Michigan came in at 84.5, improved from a preliminary May mark of 83.7. Ongoing
headlines about new record highs for the Dow may have helped.5

Consumer prices declined in April, and that may
have cheered households up as well. The Consumer Price Index fell 0.4%, the
biggest monthly retreat since December 2008. (It had fallen 0.2% in March.) The
take-home pay of Americans rose 0.5% in April, and retail sales edged up 0.1%. Annualized consumer inflation
– as measured by the overall CPI – was a very weak 1.1% in April. (That was the
tamest since September 2010.) Wholesale inflation also lessened in
April – the
Producer Price Index sank 0.7%, the most in three years. Durable goods orders
rose 3.3% for April, 1.3% with the volatile transportation category factored
out.6,7,8

GLOBAL ECONOMIC HEALTH

Eurozone manufacturing rebounded strongly in May. The
overall eurozone Markit PMI improved 1.6 points to 48.3, a 15-month peak;
Germany’s PMI improved to 49.4, Spain’s to 48.1 (a 24-month high) and France’s
to 46.4 (a 13-month high). Still, the big picture saw manufacturing contracting
in the euro area for the 22nd straight month. Economists polled by Markit also
projected the bloc’s GDP at -0.2% for Q2, which would match the retreat of Q1
and mark the seventh quarter in a row without economic growth in the region.
The European Central Bank lowered its benchmark interest rate to 0.5% last
month.9,10

Manufacturing shrank in most of the key Asian economies as well. The exception? Japan.
Markit’s PMI for that nation rose 0.4 points to 51.5 for May. China’s official
PMI came in at 50.8, but the Markit PMI dropped 1.2 points to 49.2, the first
contraction in seven months (a development which threw a shock into Japan’s
stock market and weighed on other exchanges). Taiwan’s PMI descended to 47.1,
India’s to 50.1 (poorest since March 2009), South Korea’s to 51.1, Vietnam’s to
48.8 and Indonesia’s to 51.6.11,12

WORLD MARKETS

European indices generally moved north in May; benchmarks in the Asia Pacific region
(and elsewhere in the Americas) had a tougher time of it. In the plus column:
KOSPI, +1.89%; Sensex, +1.31%; Shanghai Composite, +5.63%; TSE 50, +1.18%; TSX
Composite, +1.56%; CAC 40, +2.38%; FTSE Eurofirst 300, +1.29%; DAX, +5.50%;
FTSE 100, +2.38%. In the minus column: Bovespa, -4.30%; Bolsa, -1.60%; Nikkei
225, -0.62%; Hang Seng, -1.52%; All Ordinaries, -4.93%; Micex, -3.02%; MSCI
Emerging Markets, -2.94%; MSCI World, -0.28%.i COmposite : the TSX Composite (-2.30%), the  gan’13,14

COMMODITIES MARKETS

The U.S. Dollar Index rose 1.63% in May, so it was not exactly a banner month for
the broad commodities market. May saw descents for gold (6.06%), silver (8.14%),
platinum (2.98%), natural gas (8.33%), oil (1.63%), cocoa (5.64%), wheat (2.46%),
corn (3.11%), coffee (5.79%) and sugar (5.32%). Copper did manage an advance of
2.40% in May.15,16

REAL ESTATE

May brought a significant jump in home loan
rates. In Freddie Mac’s May 2 Primary Mortgage Market Survey, the average interest
rate on the 30-year FRM was 3.35%; by the May 30 survey, it had hit 3.81%. This
mirrored what happened to the 15-year FRM – interest rates on that loan type averaged 2.56%
on May 2, 2.98% by May 30. Average interest rates for 5/1-year ARMs rose 0.1%
to 2.66% in the same interval while rates on1-year ARMs
actually descended a bit, going from 2.56 to 2.54%.20

LOOKING BACK…LOOKING FORWARD

The small caps stood tall in May: the Russell 2000 surpassed the 1,000 mark for the first
time. It gained 3.87% on the month, ending May at 984.15. As these numbers show,
investors didn’t exactly sell and go away last month. Another notable
development: the real yield of the 10-year note was nearly back in positive
territory at the end of May.1,21

Historically speaking, June has not been a good month for stocks – on average, the S&P
500 has gone -0.30% in June since 1945. As recently as late May, analysts were
wondering if a pullback (or a correction) was in the offing, as even moderately
good economic data might encourage Fed officials to taper off easing. How
things changed in a week: the subpar ISM manufacturing index reading and
retreat in personal spending were bad news, but encouraging developments for a
stock market worried that the Fed might perceive the economy as stronger rather
than weaker. One of the more ardent Wall Street bulls, S&P’s Sam Stovall,
just noted that “the S&P 500’s performance in June could surprise to the
upside,” referencing that since 1945, the index has averaged a 0.4% gain in the
month following a 7-month winning streak. Even the much-respected “Dr. Doom”,
economist Nouriel Roubini, believes Wall Street will see two more years of
gains – he said so on CNBC at the start of this month. June may prove a wild
card; it may bring more volatility than previous months as investors watch for
any little hint of what the Fed might do, how the labor market is faring, how
the service and manufacturing sectors are holding up this spring, and how
freely consumers are spending and buying. For the record, the next Fed policy meeting
wraps up on June 19.23,24
UPCOMING ECONOMIC RELEASES: The data stream
for the rest of the month is as follows … the ISM May non-manufacturing index
and a new Fed Beige Book (6/5), the Labor Department’s May jobs report (6/7), April
wholesale inventories (6/11), May retail sales ad April business inventories (6/13),
May’s PPI and industrial output and the University of Michigan’s initial June
consumer sentiment survey (6/14), June’s NAHB housing market index (6/17), May’s
CPI and data on May housing starts and building permits (6/18), a Federal
Reserve policy announcement (6/19), May existing home sales (6/20), the
Conference Board’s June consumer confidence survey, the April Case-Shiller home
price index, April’s FHFA housing price index and the numbers on May new home
sales and durable goods orders (6/25), the final estimate of Q1 GDP (6/26), the
Commerce Department’s May consumer spending report and NAR’s pending home sales
report for May (6/27), and then the final University of Michigan consumer
sentiment survey for June (6/28).

 

«RepresentativeDisclosure»

This material was prepared by
MarketingLibrary.Net Inc., and does not necessarily represent the views of the
presenting party, nor their affiliates. Marketing
Library.Net Inc. is not affiliated with any broker or brokerage firm that may
be providing this information to you. This information should not be construed
as investment, tax or legal advice and may not be relied on for the purpose of
avoiding any Federal tax penalty. This is not a solicitation or recommendation
to purchase or sell any investment or insurance product or service, and should
not be relied upon as such. The Dow Jones Industrial Average is a
price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ
Composite Index is an unmanaged, market-weighted index of all over-the-counter
common stocks traded on the National Association of Securities Dealers
Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an
unmanaged group of securities considered to be representative of the stock
market in general. It is not possible to invest directly in an index. NYSE
Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock
Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago
Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading
provider of securities listing, trading and market data products and services.
The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical
commodity futures exchange and the preeminent trading forum for energy and
precious metals, with trading conducted through two divisions – the NYMEX
Division, home to the energy, platinum, and palladium markets, and the COMEX
Division, on which all other metals trade. The Global Dow? is a 150-stock index
of the most innovative, vibrant and influential corporations from around the
world. The KOSPI Index is a capitalization-weighted index of all common shares
on the Korean Stock Exchanges. The BSE SENSEX (Bombay Stock Exchange Sensitive
Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is
a free-float market capitalization-weighted stock market index of 30
well-established and financially sound companies listed on the Bombay Stock
Exchange (BSE). The SSE Composite Index is an index of all stocks (A shares and
B shares) that are traded at the Shanghai Stock Exchange. The FTSE TWSE Taiwan
50 Index was launched on October 29, 2002 and covers the top 50 companies in
Taiwan by total market capitalization. The S&P/TSX Composite Index is an
index of the stock (equity) prices of the largest companies on the Toronto
Stock Exchange (TSX) as measured by market capitalization. The CAC-40 Index is
a narrow-based, modified capitalization-weighted index of 40 companies listed
on the Paris Bourse. The FTSEurofirst 300 Index is part of the FTSEurofirst
Index Series and the FTSEurofirst 300 Indices, which are tradable indices
measuring the performance of European portfolios. The DAX 30 is a Blue Chip
stock market index consisting of the 30 major German companies trading on the
Frankfurt Stock Exchange. The FTSE 100 Index is a share index of the 100
companies listed on the London Stock Exchange with the highest market
capitalization. The Bovespa Index is a gross total return index weighted by

traded volume & is comprised of the most liquid stocks traded on the Sao
Paulo Stock Exchange.  The Mexican Stock
Exchange (Spanish: Bolsa Mexicana de Valores, BMV; BMV: BOLSA) is Mexico’s only
stock exchange. Nikkei 225 (Ticker: ^N225) is a stock market index for the
Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of
Asian stocks. The Hang Seng Index is a freefloat-adjusted market
capitalization-weighted stock market index that is the main indicator of the
overall market performance in Hong Kong. The All-Ordinaries Index is the most
quoted benchmark for Australian equities, comprised of common shares from the
Australian Stock Exchange. Moscow Exchange is the largest stock exchange in
Russia, located in Moscow, trading equities, bonds, derivatives and currencies.
It was officially established on 19 December 2011 through the merger of the two
largest Moscow-based stock exchanges, the Moscow Interbank Currency Exchange
and the Russian Trading System. The MSCI Emerging Markets Index is a
float-adjusted market capitalization index consisting of indices in more than
25 emerging economies. The MSCI World Index is a free-float weighted equity index that
includes developed world markets, and does not include emerging markets. The US
Dollar Index measures the performance of the U.S. dollar against a basket of
six currencies. Additional
risks are associated with international investing, such as currency
fluctuations, political and economic instability and differences in accounting
standards. This material represents an assessment of the market environment at
a specific point in time and is not intended to be a forecast of future events,
or a guarantee of future results. Past performance is no guarantee of future
results.  Investments will fluctuate and
when redeemed may be worth more or less than when originally invested. All
information is believed to be from reliable sources; however we make no
representation as to its completeness or accuracy. All economic and performance
data is historical and not indicative of future results. Market indices
discussed are unmanaged. Investors cannot invest in unmanaged indices. The
publisher is not engaged in rendering legal, accounting or other professional
services. If assistance is needed, the reader is advised to engage the services
of a competent professional.

 

Citations.

1 – cnbc.com/id/100779852
[5/31/13]

2 – reuters.com/article/2013/05/22/markets-usa-stocks-idUSL2N0E321R20130522
[5/22/13]

3 – marketwatch.com/Economy-Politics/Calendars/Economic
[6/3/13]

4 – ncsl.org/issues-research/labor/national-employment-monthly-update.aspx
[5/3/13]

5 – briefing.com/investor/calendars/economic/2013/05/27-31
[5/31/13]

6 – businessweek.com/news/2013-05-16/consumer-prices-in-u-dot-s-dot-dropped-more-than-forecast-in-april
[5/16/13]

7 – usatoday.com/story/money/business/2013/05/13/april-retail-sales/2154725/
[5/13/13]

8 – thestreet.com/story/11933260/1/sp-poised-for-three-day-losing-streak-amid-qe-wind-down-chatter.html
[5/24/13]

9 – bbc.co.uk/news/business-22752897 [6/3/13]

10 – markit.com/assets/en/docs/commentary/markit-economics/2013/jun/EZ_Manufacturing_ENG_1306_PR.pdf
[6/3/13]

11 – markit.com/assets/en/docs/commentary/markit-economics/2013/jun/Asia_trade_13_06_3.pdf
[6/3/13]

12 – reuters.com/article/2013/06/01/us-china-economy-pmi-idUSBRE95001W20130601
[6/1/13]

13 – markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp
[5/31/13]

14 –
mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html
[5/31/13]

15 – online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY
[5/1/13]

16 – money.cnn.com/data/commodities/
[5/31/13]

17 –
csmonitor.com/Business/new-economy/2013/0523/New-home-sales-rise-but-market-still-a-long-way-from-normal
[5/23/13]

18 – realtor.org/news-releases/2013/05/april-existing-home-sales-up-but-constrained
[5/22/13]

19 – latimes.com/business/money/la-fi-mo-housing-starts-construction-building-permits-economy-20130516,0,7678305.story
[5/16/13]

20 – freddiemac.com/pmms/ [5/30/13]

21 –
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F31%2F12&x=0&y=0
[5/31/13]

21 –
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F31%2F12&x=0&y=0
[5/31/13]

21 –
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F31%2F12&x=0&y=0
[5/31/13]

21 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F30%2F03&x=0&y=0
[5/31/13]

21 –
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F30%2F03&x=0&y=0
[5/31/13]

21 –
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F30%2F03&x=0&y=0
[5/31/13]

22 –
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll
[6/3/13]

23 – businessweek.com/printer/articles/520656?type=bloomberg [6/3/13]

24 – cnbc.com/id/100785848 [6/3/13]