There will not be any Weekly Re-Cap for the week of May 23 to June 2 2016. We are away for some needed R&R.

The staffs at EGS.

“Only when the tide goes out do you discover who’s been swimming naked.” — Warren Buffett

1. German Industrial Output Falls For a Second Month — German industrial production declined more than expected in March, a second consecutive drop that could signal slackening demand in Europe’s largest economy. Production, adjusted for seasonal swings, fell 1.3% from the prior month, when it dipped a revised 0.7%, according to data from the Economy Ministry in Berlin. Slowing global growth has led the German economy to rely increasingly on domestic demand, bolstered by record-low unemployment.
2. Brazil Senate (EWZ) Majority Backs Rousseff Impeachment — Brazil’s Senate voted 55-22 to suspend President Dilma Rousseff from office and begin an impeachment trial. During the trial – which could last for up to six months – Vice President Michel Temer will assume the office. He’s expected to begin naming his cabinet soon, and former central bank chief Henrique Meirelles – a favorite of investors – is in line to be named finance minister.
3. IEA: Oil Supply Glut to Shrink “Dramatically” — Global oil stocks will fall by 200K barrels per day in the second half of the year after rising by 1.3M barrels per day in H1, according to the IEA. Behind the quick rise in the first half was a faster-than-expected gain in Iranian oil production and exports. Behind what’s expected to be a dramatic reduction in the second half of the year is a continuing slowdown in non-OPEC production, and stronger demand.
4. Consumer Sentiment Hits 95.8 in May vs. 90 Estimate — the Index of Consumer Sentiment hit 95.8 in May, the University of Michigan said Friday, its highest level since June 2015. The number indicates consumers were feeling more optimistic this month, as expectations for future growth hit highs for the year, according to preliminary data released Friday.
5. Hospitals Slump on Federal Court Ruling Backing Republicans On Unconstitutionality of ACA Subsidies Without OK From Congress — Hospital stocks took a big hit late last week after bearish investors anticipated a potential softening of revenues following a legal challenge to the Affordable Care Act. A federal judge ruled that the Obama administration is unconstitutionally spending money to reimburse health insurers for the extra cost of providing coverage to low-income Americans without obtaining an appropriation from Congress. The decision adds to the uncertainty over Obamacare ahead of the Nov. 8 general election.

The week ahead — Economic data from Econoday.com:

“Trade within your ability and risk tolerance. Increase size and frequency when ability and tolerance permits it.” — unknown

1. Dow 30 Trading Range Screen — courtesy of BIG, exactly half of the stocks in the Dow are trading in overbought territory, while just two are oversold — Apple (AAPL) and Microsoft (MSFT). Apple is the most oversold stock in the index at more than two standard deviations below its 50-day moving average.

2. Cruz Suspends Campaign After Trump Wins Indiana — Texas Senator Ted Cruz has cleared the path for Donald Trump to claim the Republican presidential nomination by suspending his campaign following a crushing defeat in the Indiana primary. “From the beginning I’ve said that I would continue on as long as there was a viable path to victory,” Cruz declared. “Tonight I’m sorry to say it appears that path has been foreclosed.” On the Democratic side, Bernie Sanders was declared the Indiana winner, further frustrating rival Hillary Clinton who had hoped to wrap up the nomination at this point.
3. Aeropostale Files For Bankruptcy — struggling teen apparel retailer Aeropostale has filed for Chapter 11, marking the latest high-profile bankruptcy that follows meltdowns at American Apparel, Quiksilver and Sports Authority. According to a court filing, the company listed assets and liabilities in the range of $100M-$500M, and plans to emerge from the Chapter 11 process within the next six months as a standalone enterprise with a smaller store base. The NYSE suspended trading and delisted Aeropostale (NYSE:ARO) shares on April 21.
4. SandRidge Energy In Debt Restructuring Talks With Creditors — SandRidge Energy (NYSE:SD) is in discussions with creditors about reaching a restructuring deal ahead of a possible bankruptcy filing, Reuters reports. The company wants creditors to agree on how the debt would be reduced in the hope that it could limit the amount of time it stays in court if it files for Chapter 11.
5. U.S. Jobs Growth Slows Down in April — companies scaled back hiring in April, adding just 160,000 new jobs versus Wall Street had expected a 203,000 gain. The disappointing employment report is likely to keep the Federal Reserve from raising interest rates anytime soon. The unemployment rate remained flat at 5%, but more people dropped out of the labor force and the so-called participation rate fell for the first time in seven months. That could mean people find it a bit harder to get a job.

The week ahead — Economic data from Econoday.com:

“Wait until you get a pitch right where you want it!” — Warren Buffett

1. Chinese Debt Balloons To Record High — the FT calculates China’s total debt grew to a record 237% of GDP in Q1 or 163T yuan ($25T). The surge in borrowing comes as the Chinese government yet again turns on the spigots in order to boost stuttering growth. What worries economists is not the size of the debt, which is comparable to the U.S. and the eurozone, but the speed with which it has accumulated. The Chinese figure was 148% at the end of 2007.
2. S&P Strips Exxon of AAA Credit Rating — Standard & Poor’s Ratings Services downgraded Exxon Mobil, the world’s largest publicly traded oil company, stripping it of its triple-A rating after decades with the pristine mark. S&P questioned Exxon’s decision to spend $54 billion on stock buybacks since 2012 even as its debt load swelled. Exxon’s preference for returning cash to shareholders may be hurting its ability to stockpile cash and pay down debt, the credit rating company said.
3. Fed Holds On Rates, Warns Economy Has Slowed — the Federal Open Market Committee said in a statement released after its two-day meeting this past week that the economy has slowed and reduced levels of consumer spending. The Fed again opted not to raise interest rates. The statement highlighted the many conflicting signs in the U.S. economy – consistent job growth and an improving housing market against slowdowns in business investment and exports.
4. BOJ Surprises Markets By Not Expanding Stimulus — the Bank of Japan (BOJ) surprisingly held off from increasing its monetary stimulus as it looks to take more time to understand the effect of its negative interest rates. Specifically, the BOJ let three key easing tools unchanged: its ¥80T ($732) target for expanding the monetary base, mostly through buying government bonds; the 0.1% negative interest rate; and a program to purchasing riskier assets such as stocks. The BOJ also put back to 2017 its timeframe for achieving its target of 2% inflation, the fourth delay in about a year.

The week ahead — Economic data from Econoday.com: