“I measure what’s going on, and I adapt to it. I try to get my ego out of the way. The market is smarter than I am so I bend.” – Martin Zweig

1. Japan’s current account surplus declined in March — Japan’s surplus slumped to ¥116.4B ($1.14B) in March from ¥612.7B in February. It was hurt by weak exports and rising imports and ahead of a hike in sales tax in April. For the fiscal year, the surplus was ¥789.9B, the lowest on record.
2. Retail Sales barely rise in April — Marketwatch, sales at retailers rose a scant 0.1% in April, the Commerce Department reported. Americans boosted spending in March and February after harsh weather kept them mostly indoors in January and December. Easter also took place three weeks later this year — in mid-April instead of the end of March — making it harder for the government to seasonally adjust the numbers.
3. AAII Bullish Sentiment Falls — from Bespoke, bullish sentiment declined from 29.77% down to 28.34%, while bearish sentiment also declined from 29.45% down to 28.7%. Even though both bullish and bearish sentiment showed little in the way of change over the last week, what is notable is that bearish sentiment is now greater than bullish sentiment. This comes as the S&P 500 and Dow Jones both hit all-time high.

4. Japan first-quarter growth hits over two-year high — Japan GDP accelerating to an annualized 5.9% from 0.3% in Q4 and past consensus of 4.2%. The economy was boosted by personal consumption soaring 8.5% as shoppers went on a spree prior to sales tax rising to 8% from 5% on April 1. A 4.9% rise in capital expenditure also helped.
5. Eurozone GDP growth held steady at 0.2% in Q1 — Germany maintained its role as the bloc’s engine of growth, with economic expansion doubles in first quarter. France returned to neutral with zero growth after rising 0.2% in Q4 and Italy fell back into contraction of 0.1% following an expansion of 0.1%. The ECB’s vice president said that it is open to further monetary easing to prevent the euro zone from stagnating under an extended period of low inflation.
6. Economists lift 2nd-quarter US growth forecasts — CNBC, economists raised their forecasts for U.S. economic growth in the second quarter and through the balance of 2014. Analysts see the economy growing at an annual rate of 3.3 percent in the current quarter, up from a previous estimate of 3.0 percent. Third-quarter growth was forecast to accelerate to 2.9 percent, up from a prior forecast of 2.8 percent, and fourth-quarter growth estimates have been raised to 3.2 percent from 2.7 percent.

The week ahead — Economic data from Econoday.com:

“Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy.” – Dale Carnegie

1. Service Sector Increased in April — the ISM ‘s nonmanufacturing survey for April showed stronger services at 55.2. New orders increased 5 points to 58.2. Business activity and new export orders each rose 7.5 points to 60.9 and 57. Employment was the weak spot and it shed 2.3 points to 51.3.
2. China Factory Data Decrease — the Market/HSBC manufacturing PMI measure for April was 48.1. It was the 4th month in contraction. Output and new work declined over the month, employment fell a 3rd straight month and prices decreased.
3. Annual home-price growth posts sharpest slowdown in three years — according to data released, home prices rose in March, with certain regional markets posting fresh peaks, while the U.S. as a whole saw a sharp slowdown in annual growth. Looking at a longer-term trends, prices are slowing down, with dropping affordability cutting demand. For the year through March, home prices rose 11.1%, a notable slowdown from annual growth of 11.8% in February, which was the fastest pace in eight years.
4. Alibaba filed for an IPO in the U.S. — it is expected to be one of the largest in history. Forecasts on valuation range as high as $245B for the company that earns more revenue than Amazon and eBay combined. Last year, Alibaba handled about $248B in transactions. Yahoo (YHOO) has a 22.6% piece of the Alibaba pie, while SoftBank (OTCPK:SFTBF) holds 34.4%.
5. China’s inflation slowed to an 18-month low — China’s (FXI) inflation decreased to 1.8% in April from 2.4% in March. Factory-gate prices (PPI) dropped for the 26th consecutive month with a decline of 2%. With other data indicating that China’s economy is slowing down, economists attributed the fall in CPI to a weakness in demand.

The week ahead — Economic data from Econoday.com:

“Beware when investing turns into speculating” — Warren Buffett

1. UK economy grows at fastest pace in over 6 years — UK ‘S Gross domestic product growth strengthened to its fastest rate in six years in Q1, climbing to +3.1% on year from +2.7% previously.
2. S&P 500 Sector Weightings Changes in 2014 — below is an updated look at the current weightings for each of the ten sectors in the S&P 500 courtesy of BIG. Energy, Utilities, Consumer Staples, Health Care and Telecom have all seen increases in their S&P 500 weightings this year, while Materials, Financials, Technology, Industrials and Consumer Discretionary have lost share.

3. China’s official manufacturing PMI edged up to 50.4 in April from 50.3 in March — the data indicates that manufacturing is just about expanding and adds to HSBC’s flash PMI reading which demonstrates that the sector is contracting.
4. Fed Tapers Bond-Buying by $10B — the Federal Reserve voted unanimously to trim its monthly bond-buying by $10 billion to a monthly pace of $45 billion. Federal Reserve Chairwoman Janet Yellen pointed out there’s “slow but steady loan growth” that she considers an encouraging sign of an improving economy.
5. ISM manufacturing index climbs to 54.9% in April from 53.7% — MarketWatch, the Institute for Supply Management said its manufacturing index rose to 54.9% last month from 53.7% in March, marking the highest level since December. That was higher than the 54.4$ forecast of economists surveyed by MarketWatch. Readings over 50% indicate more companies are expanding instead of shrinking.

The week ahead — Economic data from Econoday.com:

“Distrust and caution are the parents of security” — Benjamin Franklin

1. Japan overhauls its public pension fund — Reuters, the government announced a reshuffle of the Investment Committee of the $1.26 trillion Government Pension Investment Fund (GPIF), in line with Abe’s drive to have the fund make riskier investments and rely less on low-yielding government bonds. The revamp is part of Abe’s “third arrow” of his strategy to reform the economy and lift Japan out of deflation.
2. European Central Bank (ECB) could embark on a broad-based asset buying plan — ECB President Mario Draghi said Weaker inflation could prompt broad ECB asset-buying. He also added that a further strengthening of the euro could also prompt action.
3. The FDA is set to unveil proposals to regulate electronic cigarettes — the proposal will include an eventual ban on sales to anyone under 18 and manufacturers will also have to gain FDA approval for their products, disclose the chemicals used in the devices and add health warnings about the addictiveness of nicotine. Lorillard (LO) commands almost 50% of the e-cigarette market in convenience stores, while Altria Group (MO) and Reynolds American (RAI) are starting to ramp up their offerings.
4. China’s manufacturing sector has contracted for a fourth consecutive month in April — the HSBC PMI gauge has edged up to 48.3 from 48 in March. “Domestic demand showed mild improvement and deflationary pressures eased,” says HSBC, “but downside risks to growth are still evident as both new export orders and employment contracted.”
5. Alaska Legislature approves state stake in major gas pipeline, LNG project — Alaska’s legislature has approved Governor Sean Parnell’s proposal to allow the state to negotiate the export of natural gas with BP (BP), ConocoPhillips (COP), ExxonMobil (XOM) and TransCanada (TRP). The plan is to build an 800-mile pipeline to a liquefied natural gas export plant, with the project set to cost $45B-65B. The state would retain ownership of 25% of the LNG plant.
6. S&P has reduced Russia’s rating by a notch to BBB-, one grade above junk level, S&P kept the country’s outlook at negative as the tensions with Ukraine continue to ratchet up. Russia began military exercises on its border with Ukraine in response to the latter killing five pro-Moscow rebels during attempts to reassert control over the eastern part of the country.

The week ahead — Economic data from Econoday.com:

“All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” – Arthur Schopenhauer

1. Pro-Russian protesters occupied at least nine cities in the east of Ukraine — Pro-Russian armed separatists in several cities in eastern Ukraine have ignored a deadline from Ukraine’s government to disarm, and vacate administrative buildings and other positions they’ve taken up. Ukraine, which blames Russia for the escalating tension, has threatened to carry out a “large-scale anti-terrorist operation” on the separatists.
2. People’s Bank of China disclosed it withdrew 172B yuan ($28B) through repurchase agreements — China’s money supply grew at its weakest pace in over a decade during March. Subsequently, new car sales in China decelerated in March to a 6.6% growth rate, according to the China Association of Automobile Manufacturers.
3. China’s Growth Slows to Six-Quarter Low — Bloomberg, China’s expansion moderated to the weakest pace in six quarters and property construction plunged. 1Q GDP moderating to 7.4% on year from 7.7% in Q4 but topping forecasts for 7.3%. The figure is below the government’s target of 7.5%, although the country’s leaders have indicated that the goal is flexible as they try to implement reform.
4. Fed’s Beige Book Showed consumer spending improved along with the weather — according to the reports from the 12 Federal Reserve Districts, the latest number suggested economic activity increased in most regions, but Cleveland and St. Louis saw declines. February’s Beige Book (released on March 5) blamed Mother Nature for the slowdown.

“I ‘m convinced that everything that’s important in investing is counterintuitive, and everything that’s obvious is wrong” — Charlie Munger

1. The Bank of Japan (BOJ) has kept its key interest rate unchanged — BOJ kept rate at 0.1% and left unchanged its program of expanding the monetary base by ¥60-70T ($580-680B) a year. The BOJ refrained from further easing and maintained its optimism about the economy despite concerns about the impact of a rise in sales tax that took effect last week.
2. Another Coal Company filed for Bankruptcy — James River Coal has filed for Chapter 11 with $818.7M in debt after missing an interest payment on $275M of senior notes. As with Patriot Coal (OTC:PATCA), which filed for bankruptcy protection in July 2012, James River Coal (JRCC) has suffered from falling coal demand due to gas prices plunging because of the shale boom.
3. Greece returns to bond markets — MarketWatch, struggling Greece is scheduled to tap the international capital markets in a long-term bond sale as soon as Wednesday after an exile from the financial community since 2010. The 10-year yield fell below the 6% level late last week. Although Greece’s bond is almost 450 basis points higher than the German equivalent, it’s a major improvement from the +30% levels in early 2012.
4. Federal Regulators told eight largest U.S. banks to increase reserves — 8 largest banks were told to increase another $68B in loss-absorbing capital after U.S. regulators voted to raise the “leverage ratio” to 5-6% of their total assets, well above the Basel III standard of 3%. The banks affected include JPMorgan (JPM), Citigroup (C), Bank of America (BAC) and Goldman Sachs (GS). The eight firms have until January 1, 2018 to comply with the new rule.
5. Chinese exports tumbled 6.6% on year in March — Bloomberg, China ‘s overseas shipments declined 6.6 percent from a year earlier, the customs administration said in Beijing. The drop attributed to distortions from inflated data in early 2013. Imports fell 11.3 percent, in part on falling commodity prices, leaving a trade surplus of $7.71 billion. Imports slumped a worse-than-expected 11.3%, while the trade balance swung to a surplus of $7.71B from a deficit of $22.98B.
6. Japan’s Cabinet has approved a controversial plan to reinstate nuclear energy — Japan government plans to reinstate nuclear energy an important source of electricity, although there are doubts about how big a role atomic power will be able to play. The country’s nuclear plants were shut following the Fukushima disaster over three years ago, which has caused the country to significantly increase its energy imports.

The week ahead — Economic data from Econoday.com:

“In skating over thin ice our safety is in our speed.” – Ralph Waldo Emerson

1. China ‘s PMI data painted a mixed picture of the country’s manufacturing sector — China (FXI) official gauge, which focuses on larger state-owned enterprises, edging up to 50.3 in March from 50.2 in February. The HSBC index, which gives more weight to smaller private companies, slipped to 48 from 48.5. HSBC says that its reading confirms the weakness of domestic demand and that it implies 1Q GDP growth of below the annual goal of 7.5%.
2. FBI Probes High-Frequency Trading Firms for Abuse of Information — Bloomberg, Federal agents are investigating whether high-frequency trading firms break U.S. laws by acting on nonpublic information to gain an edge over competitors. the agency is looking at whether traders manipulate the market by placing a set of orders and then very quickly canceling them. In a 60-minutes interview, Michael Lewis accused high-speed trading firms of rigging the markets in a new book called “Flash Boys.”
3. Virtu Financial, High-Frequency Trading Company delayed marketing its IPO — company has delayed its IPOs as increasing controversy over high-frequency trading (HFT). Virtu’s (VIRT) postponement comes after Michael Lewis accused HFT firms of rigging the market in a new book called “Flash Boys,”. The FBI has disclosed that it’s also investigating the industry as well as the SEC. Late last Friday, the Department of Justice (DOJ) also joined the fray.
4. China unveiled mini-stimulus package — China announced a program which includes selling 150B yuan ($24.6B) in bonds for railway construction, improved housing for the low paid, and tax relief for struggling small companies. The size of the package won’t come close to the massive 2008 stimulus that boosted growth but also bad loans.
5. Stock Market Since 1900 — the chart below shows the S&P Composite Index, on a logarithmic scale, since 1900. The log scale helps illustrate long-term index patterns, namely the distinct periods of range bound and trend bound markets.

The week ahead — Economic data from Econoday.com:

“If you take emotion – would be, could be, should be – out of it, and look at what is, and quantify it, I think you have a big advantage over most human beings.” — John Henry