Investors Search for a Catalyst to Push Stocks Even Higher


Just two days after hitting a new record high last Monday, stocks hit an air pocket midweek on worries that the Trump administration would become crippled by developments in Washington. On Wednesday, the S&P 500 dropped 1.8 percent. It was the single worst day for the index in eight months. The dormant VIX index of implied volatility, which had become a focal point of investor complacency in recent weeks, surged 46 percent to 15.6. And the pullback in stocks was seen around the globe as the MSCI World index fell 1.2 percent. The yield on the ten-year Treasury note tumbled 11 basis points from 2.33 to 2.22 percent.

U.S. Consumers Stir to Life, Shaking Off Winter Slumber

The hibernating U.S. consumer showed signs of shaking off its winter slumber and stirring to life last week. In the first quarter of the year, personal consumption was estimated to have grown at a somnolent annualized rate of just 0.3 percent. By comparison, over the past three years personal consumption has averaged 2.9 percent. It was the weakest quarterly pace of consumption in eight years, and followed an average rate of 3.25 percent in the second half of last year. Admittedly, the accuracy of first quarter economic reports has been challenged for several years. But even faulty seasonal adjustments likely don’t fully explain just how weak the quarter was, especially for an economy dependent upon the consumer spending for 70 percent of its total activity.

Markets March Ahead Through Dizzying Slew of News

There were enough potentially market-moving events last week to make one’s head spin. The House voted to replace Obamacare, the Fed chose to leave rates unchanged, the president signed a bill to keep the government funded through September, the economy created three times as many jobs in April as in March, one-fifth of the S&P 500 reported earnings, and France went to the polls on Sunday to elect a new president.