The Week Ahead: Markets head into June concerned about higher oil prices do to the Gulf oil spill, the weakest consumer spending report in seven months, and Spain’s credit rating being cut by Fitch. Further insight will be provided by three reports on Tuesday: Auto Sales, the ISM Manufacturing Index, and Construction Spending. In addition to this watch Thursday’s Jobless Claims, Productivity and Costs, Factory Orders, and the ISM Non-Manufacturing Index. Lastly, Friday’s Employment Report may have the most impact on stocks and bonds.
Stocks to Watch: Stocks related to the oil spill disaster in the Gulf continue to weaken as Halliburton (HAL), Baker Hughes (BHI), Diamond Offshore Drilling (DO), and FMC Technology (FTI) headed lower. Nabors Industries (NBR) bucked the trend as it is mostly a land driller and its stock headed higher. The growing possibility of a weakening European economy had Dow Chemical (DOW) down as 2/3 of the company’s sales come from overseas. Blue Coat Systems (BCSI), a network security management firm, lost 1/4 of its value on a ratings cut over concerns about its European business.
Special Note: Volatility in May was the worst in over a year for the Dow Industrials. The biggest losing sectors were Energy down 11.8%, Industrials down 9.8%, and Materials down 9.7%. The rate of change in the core CPI figures which excludes food and energy fell to the lowest level since 1966. In addition to this, the now privately computed M3 money supply numbers show the broadest aggregate measure to have declined by almost 10% on an annualized basis. Perhaps deflation is the real threat going forward in all asset related markets.
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