There may not be much in common between copper and coffee or oil and cotton. But there is a common thread through each commodity’s exposure to the health of the global economy. After all, it is the forces of supply and demand that are the final determinants of prices, though short-term deviations from fundamentals are not uncommon either.

The reversal of last week’s sharp pullback in commodity prices and weakness in stocks reflected a re-assessment of the U.S. economy following Friday’s impressive labor market numbers. Sentiment on the economy had started souring following a number of soft economic readings that appeared to show the first-quarter GDP slowdown extending into the current quarter and beyond. Friday’s jobs report went some way in reassuring the markets about the resumption of growth momentum following the first quarter’s anemic pace.

The key going forward will be continuation of this improving labor market trend. But with the next non-farm payroll report a month away, we will have gauge the labor market’s health from the weekly Jobless Claims report. So we will be looking closely at this weekly report (each Thursday) to see if the recent negative turn in this key series gets reversed. Bottom line: stocks and commodities will remain choppy, likely with a downward bias, as the positive glow from Friday’s report wears off.

The earnings season is almost over, though reports are still trickling in. The big one today is from Disney (DIS) after the close. This morning, we had Dean Foods (DF) come ahead of expectations, with the company offsetting rising commodity prices through improved pricing and better cost controls. Fossil (FOSL), the watch-maker, beat top- and bottom-line expectations, but guided lower for the current quarter.

In other news, Microsoft (MSFT) is reportedly mulling the purchase of Skype, the online calling service, for over $8 billion. This would be the biggest acquisition in Microsoft’s history if the report turns out to be true.

We should continue to see stocks sustain the positive momentum of the last two days, which in essence reflects the lingering positivity from Friday’s positive jobs report.
DEAN FOODS CO (DF): Free Stock Analysis Report
DISNEY WALT (DIS): Free Stock Analysis Report
FOSSIL INC (FOSL): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
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