|Global Market Wrap-Up - Global Market Wrap-Up|
U.S. stocks sold off sharply despite better than expected earnings reports from bellweathers JPMorgan (JPM) and Intel (INTC); the S&P 500 retreated 1.1% and the NASDAQ 1.2%. After a stellar first week of the new year, the S&P fell 0.8% and NASDAQ 1.3% in the second week. Despite the "better than expected" figures (against analysts expectations who almost religiously understate reality), concerns voiced here and among members of the Euro Pacific team about the weakness of the US consumer suddenly mattered to the market today.
There was also a weaker than expected University of Michigan consumer sentiment report but stocks were headed for weakness before this data surfaced.
The weakness in equity markets, led to knee jerk runs to the "safety trade" - creating rallies in both US bonds and the dollar. In a return to the inverse correlation trade seen through much of 2009, commodities took a hit. Oil fell for the 5th session in a row to settle at $78.00, while gold dropped $12 to $1131 and silver 22 cents to $18.44.
One interesting report today that won't get much focus is the growing disparity between wage growth and inflation; keep in mind the following data used government inflation which is substantially understated from what Americans see in their day to day lives. If you have a child in college, pay for healthcare, use gas, heat your home, or eat food - you know inflation was higher than "2.7%" last year. If you don't do any of things - you have no worries; inflation is benign.
Again let us stress none of these factors disappeared the past 3, 6, or 9 months. Many times the market chooses to ignore what is happening on Main Street - or in fact one can argue many of the penalties hampering Main Street (loss of jobs, lack of wage growth, a move to a more temporary work force) actually are helping corporate profits, especially in large multinational corporations. Only a massive bout of government borrowing and spending, on the order of 1 of every 6 dollars of the average American's income (highest level since 1929) is helping to push these inconvenient facts under the rug.
Let us repeat, if the government is saying inflation adjusted pay has sunk for 5 of the past 7 years using their understated CPI - you can be assured the reality is 7 out of 7 years.
In Europe, stocks were weaker across the board. Britain's FTSE 100 fell 0.8%, Germany's DAX 1.9%, and France's CAC-40 1.5%.
Asian markets were mixed with gains in Japan (+0.7%) and China (+0.3%) offset by small losses in India (-0.2%) and Hong Kong (-0.3%).
Brazil followed the domestic market downward, dropping 1.2%.
Aside from being a daily contributor to Euro Pacific Capital, Mark also maintains the website Fund My Mutual Fund.