Overnight, Japan's first quarter GDP rose 0.9% quarter-over-quarter; it was up 0.2% from the year prior. This was better than the economists' expectations, and it was led by large increases in residential investment and public investment. The Japanese Nikkei Index was down 0.39% in overnight trading while the US Japanese ETF (EWJ) was down upwards of 1%.
In US economic data, jobless claims spiked up to 360,000 from 328,000 the week prior, well below the estimates of 330,000; this did not appear to be influenced by any special event. Housing starts recorded an enormous drop in April, falling 16.5% month-to-month to an annualized rate of 853,000, down from 1.021 million the month prior. The large drop in housing starts was attributed to a 38.9% drop in multi-family units. The number of building permits (which are technically more important since they show forward building activity) saw a large 14.3% monthly boost to 1.017 million, led by a 37.5% monthly increase in multi-family units.
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Consumer inflation data continued to decline. The US consumer price index fell to an annual growth rate of 1.1%, falling at a monthly rate of 0.4%. A year ago, the annual rate was 2.3%. The last piece of economic data was the Philadelphia regional manufacturing survey, which fell to an index reading of -5.2 from 1.3 the month prior. The consensus was for a rise to 2.0. The new orders, employment, and shipment subindexes continued to remain in sharp contraction territory.
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US equities traded around the unchanged mark for much of the entire day, with S&P 500 futures remaining within a 6-point band. However, at the close, selling took over and the S&P closed down 8.31 points. This is only the second time in the past two weeks that this major US index has closed in negative territory. The defensive utilities and consumer discretionary stocks continued to get hit today, giving back all of their outperformance from the year. Treasuries remained solidly bid following the negative economic data in the morning.
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Tomorrow's Financial Outlook
Tomorrow morning, the University of Michigan will release the first estimate of its May consumer confidence survey. Economists are expecting the index to trend up to 77.5 from 76.4 the month prior. The other economic datapoints for the day are the leading economic indicators, though they are from April so we are dubious on the datapoint's actual significance.
Globally, China will release property prices from April with huge gains expected. The other major datapoint is Canadian consumer inflation for April.
There will be no major earnings reports tomorrow.
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