Real Story: Friendly Trend - TheStreet

Real Story: Friendly Trend

After a huge month, you can't get too upset about one down day. Plus, Joe Brusuelas breaks down the economic data.
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"A positive interpretation of Monday's data is that -- along with Friday's soft first-quarter GDP report -- it confirms the

Federal Reserve's

preferred scenario of a slowing economy helping to bring down inflationary pressures," Aaron Task says on Monday's

Real Story podcast. "That's good news for both the Fed's credibility and -- if you're bullish -- financial assets."

With earnings season winding down, the economic news did take center stage Monday. The reaction of financial markets reflected the data's seemingly mixed message, with Treasuries rallying while stocks retreated.

The Treasury market certainly took a bullish view of the data, which included weaker-than-expected reports on personal consumption, Chicago PMI and construction spending, the benchmark 10-year note rose 19/32, its yield falling to 4.63%.

Such a relatively low Treasury yield is bullish for stocks, says Task, as it provides little competition for yield-seeking investors. It's also bullish for housing, because mortgage rates are pinned to the 10-year's yield.

Nonetheless, major averages retreated Monday, with the

Dow

falling 58.03 points, or 0.44%, to 13,062.91. The

S&P 500

lost 11.70 points, or 0.78%, to 1482.37. The

Nasdaq

was hit the hardest, slumping 32.12 points, or 1.26%, to 2525.09.

The consumption data weighed on retail stocks such as

Coach

(COH)

and

Target

(TGT) - Get Report

. The S&P Retail Index fell 1.8%.

Major averages were further dragged down by weakness in last week's standouts, including

Amazon.com

and

(AMZN) - Get Report

American Express

(AXP) - Get Report

, as well as a host of chip stocks such as

Broadcom

(BRCM)

,

Micron

(MU) - Get Report

and

Qualcomm

(QCOM) - Get Report

. The Philadelphia Stock Exchange Semiconductor Index fell 1.1%.

Monday's decline may just represent "profit-taking" or perhaps is a reflection that a rate cut is "already priced in" to stocks, says Task, who credited Bank of America strategist Thomas McManus for the latter concept. But the session in no way overshadows the market's stellar monthly performance. For the month of April, the Dow rose 5.7%, its best month since December 2003, while the S&P and Nasdaq each jumped 4.3%, also the best monthly gains since late 2003.

" We're clearly not headed toward a recession," Task's guest, Joseph Brusuelas,chief U.S. economist at IDEAglobal, says of Monday's data stream. Brusuelas highlighted the 0.7% rise in real disposable income. "We've got a good number of months where incomes have increased. As consumers get more assured about their situation, gasoline prices recede and hysteria about subprime loans abates" consumer spending will rebound.

In the remainder of the podcast, Task reviewed the day's corporate news, including earnings-related moves from

RadioShack

(RSH)

and

Sysco

(SYY) - Get Report

; M&A action involving

International Securities Exchange

(ISE)

and

Enpath Medical

(NPTH)

; as well as the latest speculation over the fate of

Citigroup

(C) - Get Report

Chairman and CEO Chuck Prince.

Click

here to listen to the entire podcast.