S&P 500 had another bad day, closing down 0.84% at 1612.5. It also closed below the 1617 regression line that we touched on yesterday. Of course, today's decline cut the MACD nearly in half to 2.44. It is closing in on the zero line with the average still above it at 8.04. The upward trend has not only stopped, but it is set to turn into an effective downward trend unless helped by some economic data and/or the Fed. Retail sales and initial jobless claims data will be released tomorrow, followed by May PPI and industrial production on Friday.
Again, we think May retail sales may have been helped with slight uptick in gasoline prices during the second half of May. Auto sales will likely be flat after the nice 1% pop last month. So, while the headline figure might come in-line or better than the 0.5% m/m change consensus, we think retail sales, excluding autos and gasoline, could come in slightly below the 0.3% consensus.
Initial jobless claims are pretty difficult to project, especially given the seasonal factors applied and BLS' consistency with its revisions. The consensus is 350K.
Regarding Friday's industrial production number, given the continuing disappointment in ISM-manufacturing, we think it will come in pretty much unchanged at 98.76 (a mere 0.02% change) compared with April's 98.74. The consensus is for a 0.2% change or 98.94. Although most of the regional surveys' work week figures declined in May, we think given lower production, capacity utilization remained at 77.8% compared with economists' estimate of 77.9%.
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