"A positive interpretation of Monday's data is that -- along with Friday's soft first-quarter GDP report -- it confirms the
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
falling 58.03 points, or 0.44%, to 13,062.91. The
lost 11.70 points, or 0.78%, to 1482.37. The
was hit the hardest, slumping 32.12 points, or 1.26%, to 2525.09.
The consumption data weighed on retail stocks such as
. The S&P Retail Index fell 1.8%.
Major averages were further dragged down by weakness in last week's standouts, including
, as well as a host of chip stocks such as
. 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
; M&A action involving
International Securities Exchange
; as well as the latest speculation over the fate of
Chairman and CEO Chuck Prince.
here to listen to the entire podcast.