The Pullback Continues

Stocks and other risk assets were mixed on Friday as investors digested a slew of economic and earnings data. As earnings continue to be released in droves, it is paramount that we not only pay attention to the actual numbers but how the stocks (and major averages) react to the numbers.  This allows us to see how the market participants are “voting” and helps us filter out the noise and focus on what matters most: price action The fact that the Dow Jones Industrial Average, Small Cap Russell 2000, are below their respective 50 DMA lines suggests that this important moving average might become an area of resistance. The S&P 500 broke its upward trendline which is not ideal.

Monday-Wednesday: Buyers Show Up And Curb The Selling Pressure

The stock market was closed on Good Friday so Monday was the first day stocks could react to March’s disappointing jobs report. The Labor Department said, U.S. employers added 120,000 new jobs in March which missed the +203,000 expectation. The unemployment rate slid to +8.2% which was somewhat encouraging. On Sunday, China said its consumer price index (CPI) rose 3.6% which topped the 3.3% estimate and suggests inflation is increasing. On Tuesday, stocks in Europe were smacked as debt woes resurfaced and the world awaited the official start to Q1 earnings season. Economic data failed to impress. The Commerce Department said wholesale inventories rose more than expected in February. Inventories rose +0.9% to a record $478.9 billion which topped the Street’s forecast for a +0.5% gain. The National Federation of Independent Business said its index, which measures confidence among small businesses, slid for the first time in 6-months which reiterates recent concerns regarding a slowdown in Q1 economic growth. The index fell to 92.5 in March from 94.3 in February.

On Wednesday, stocks and other risk assets bounced around the globe helping the Dow Jones Industrial Average snap a 5-day losing streak. Fears regarding the EU debt crisis eased on bit on Wednesday which helped risk assets rally. Economic data was mixed, the Labor Department said import prices rose +1.3% in March which was the largest gain in nearly one year and easily beat the Street’s expectation for a gain of +0.8%. The Fed’s Beige Book showed modest economic conditions across much of the country.

Thursday & Friday’s Action: Stocks Rally As Investors Digest A Slew of Data:

Before Thursday’s open, weekly jobless claims rose by +13,000 to a seasonally adjusted 380,000, which missed estimates. It was the highest reading since January and bodes poorly for the jobs market, especially after March’s disappointing jobs report. Other economic news was mixed to more positive. The Labor department said its producer price index (PPI) was unchanged in March thanks in part to a decline in energy prices, which offset a rise in food prices. The unchanged reading missed the Street’s expectation for a gain of +0.3% and helped allay inflation woes. Finally, the Commerce Department said the trade deficit narrowed unexpectedly by 12.4% to $46.0 billion in February and exports gained to a record $181.2 billion. After Thursday’s close, Google announced Q1 results which were mixed; earnings beat expectations while revenue was largely inline. The big news from the report was a stock split and a new class of shares which will help the company’s senior management team maintain control over their company. Before Friday’s open, China said its GDP rose by +8.1% in Q1 which missed the Street’s +8.2% expectation and was the lowest reading in three years. JPM and WFC both released upbeat numbers. Meanwhile the consumer price index (CPI) matched estimates but consumer sentiment missed.

Market Outlook- In A Correction