This column originally appeared on Real Money Pro at 8:42 a.m. EDT on April 3.
NEW YORK (
"If there was ever a misleading day, this [Tuesday, April 2, 2013] was it."
-- Dan Greenhaus,
Since I have been away over the past two days, the
has risen by only about 2 points.
Nevertheless, some subsurface weakness and emerging divergences have been developing, a thinning out that has historically presaged broader declines:
- The Russell 2000 underperformed on Monday (-1.3%) and was down (-0.5%) on an up day on Tuesday.
- The advance/decline line is eroding as the market's rise narrows.
- Breadth disappointed - yesterday, NYSE decliners eclipsed advancing issues by over 200, excluding ETFs and fixed-income closed-end funds.
- The number of new 52-week highs narrowing.
- The bank stocks/brokerages are lagging.
- Transports trailed, down 1.5% and 1.2% on the first two days of the week, respectively -- check out the chart of FedEx (FDX).
- Semis got schmeissed (-2.0% on Monday and -0.8% on Tuesday).
- The cyclical index dropped by -0.7% on Tuesday, following a 1.2% decline on Monday -- check out the chart of Caterpillar (CAT).
- The yield on the 10-year U.S. note remains low (1.86%) and is signaling slowing domestic economic growth -- speaking of the bond market, this week brought a continued disconnect between Treasury note and bond yields (lower by 3 to 4 basis points) compared to the market averages (slightly higher in price).
On the other hand, the consumer nondurables/staples sector has been on fire, with continued gains in the share prices of
Procter & Gamble
(PG - Get Report)
(CL - Get Report)
(PEP - Get Report)
and the like, and so has the traditionally defensive health care group.
It is an unusual market feature when defensive stocks are among the leading groups in a market moving to new highs.
Global Economic Growth Is Slowing
Besides the aforementioned weakness in market breadth and divergences, this week has brought additional and continuing signs of slowing domestic economic growth.
Some of the data suggest that my estimate of first-quarter 2013 real GDP growth of +2.75% to +3.25% -- most Wall Street firms are at +3.25% to +3.50% -- may be unsustainable over the balance of the year.
March ISM (at 51.3 vs. expectations of 54.0 and February at 54.2) was well below expectations, as the January-February inventory rebuild appears to have been nearly completed, leading to a moderation in manufacturing activity in the last four weeks of the quarter. New orders were especially poor, falling below the six-month average.
U.S. bond yields continue to slip (now at 1.86%).
U.S. Economic Surprise Index has recently fallen to a four-week low, and the non-U.S. surprise indices are all also moving down. (Note: Worsening economic trends have resulted in my paring back, once again, of my short bond position, as I continue to try to position myself for the best possible entry point for a long-term play in the asset class.)
After the close on Tuesday, March (SAAR) automobile sales came in at 15.22 million units, slightly less than expectations of 15.32 million and below February's print of 15.3 million. March's deliveries were the weakest since October 2012 and have more or less flat-lined since November's nice increase -- and so have the shares of
(F - Get Report)
been virtually unchanged over the last three months.