Sellers Starting to Emerge in the Bull Market: Economy Is Hitting Escape Velocity, Wal-Mart’s Customers Are More Broke Than Anyone Realizes, House Farm Bill Moves Ahead With Big Cut in Food Stamps

Sellers Starting to Emerge in the Bull Market

The stellar rally in global equity markets appears to be far from over. Still, some market watchers say they are starting to spot something that they haven’t seen for a while: sellers moving back in.
Fueled by monetary stimulus from major central banks, stock markets in the U.S., Europe and Asia have enjoyed seven months of strong gains, with the Dow Jones Industrial Average and S&P 500 setting new record highs overnight.
Analysts say that although the trend remains intact for now, signs of selling in recent days suggest some caution is starting to emerge.
“We are starting to see a little bit more of two-sided type trade, we see some sell-side participants and today [Wednesday] was a good example of that, whereas before trade was so heavily weighted towards the buy-side,” Ben Lichtenstein, president of Tradersaudio.com, told CNBC Asia’s “Squawk Box” in response to a question about whether cracks in the market rally are starting to show.

Wal-Mart’s Customers Are More Broke Than Anyone Realizes

Living paycheck to paycheck.
Wal-Mart released earnings today and revealed that it’s grappling with a slump in sales.

Sales rose 1% to $113 billion, falling below Wall Street’s expectations.
The largest U.S. retailer blamed the miss on a slew of economic factors, including the payroll tax increase, tax refund delays, and even bad weather.
But the scary truth about Wal-Mart’s customers?
They’re broke, said Brian Sozzi, chief equities strategist at Belus Capital.
“They are still living paycheck to paycheck, something that’s not captured in headline jobs numbers but is captured in weak wage growth,” Sozzi said. ”Bottom line here: Food and gas price deflation have not yet caused the Wal-Mart shopper to spend more during each trip.”
…
Wal-Mart profit, sales miss views; shares fall

Philly Fed Slips Into Contraction (Again); Current Conditions Recessionary, Future Expectations Far Too Optimistic

Received The Philly Fed Business Outlook Survey shows regional activity weakened with current indicators negative. The Six-Month Outlook brightened in what I believe is rampant over-optimism.
“The current activity index has shown no pattern of sustained growth over the past seven months, generally alternating between positive and negative readings.”

Note the negative slope of current conditions and future expectations. Current conditions are in recession territory.
We Just Got A Bunch Of Crappy Data!!! Tragic Trifecta: Initial Claims Soar, Housing Starts Plunge, CPI Below Expectations, Philly Fed Misses, Key Indicators Negative Across The Board!!!
Canada’s Economy Is Entering A World Of Hurt

S&P DOWNGRADES BUFFETT’S BERKSHIRE

 

US Macro Data At Its Worst In 8 Months

Presented with no comment…

US Macro data is its worst in 8 months…
(note – the US Macro index is Bloomberg economic surprise index which not only tracks absolute performance but relative to consensus – so we missing expectations and macro data is dropping…)

House Farm Bill Moves Ahead With Big Cut in Food Stamps

A Republican-controlled panel in the U.S. House of Representatives on Wednesday approved the biggest cuts in food stamps for the poor in a generation and a potentially expensive expansion of federally subsidized crop insurance.
The House Agriculture Committee approved a five-year, $500 billion farm bill on a 36-10 vote. The next step will be debate by the full House, which is likely to start in June.
Congress is months late in writing a new farm law. The Senate Agriculture Committee advanced its version on Tuesday and the full Senate is set to begin debate on Thursday.
The House and Senate bills each end the $5 billion-a-year direct-payment subsidy, long a target of reformers, and spin off at least three new types of crop insurance.
Almost half the savings in the House bill would come from a $20.5 billion cut over 10 years in spending on food stamps for low-income Americans.

Morgan Stanley: “Most Of The Buying Has Come From Shorts Covered Rather Than Longs Bought”

Money-on-the-sidelines!! not so much… Massive short-covering rally – yes…
Quoting from MS’ John Schlegel:

L/S funds have been consistently covering over the past month, which has driven gross lower and net higher.

One way we measure long and short activity is by looking at the activity z-scores on a rolling basis where the past 20 days’ cumulative activity is compared to all 20-day rolling periods over the past 12 months. On this basis, the short activity z-score reached -2 as of this week, indicating significant covering by L/S funds. Other times we’ve seen a minus 2 z-score: late April 2010, early July 2011, and late Oct 2011.

Looking at the long activity, it had been relatively paired off (i.e. longs bought approximately equal to longs sold), prior to a small increase very recently. This illustrates that most of the buying has come from shorts covered rather than longs bought

Mystery solved.

IMF: Diminishing returns from QE programs

Global central bank bond-buying efforts were warranted and helped stabilize the financial system, but they may need to be wound down as long as the economy is able to grow moderately, the International Monetary Fund said Thursday.

The study, coming at a time when the Federal Reserve is considering whether and how to exit, will add to the debate around the still-controversial practice.

The IMF found the bond-buying efforts of the Fed, the Bank of England, the European Central Bank and the Bank of Japan were able to restore the functioning of financial markets and provide accommodation with interest rates at near zero levels. The IMF found asset prices benefited globally, though capital flows increased to emerging markets.

“While additional unconventional measures may be appropriate in some circumstances, there may be diminishing returns, and benefits will need to be balanced against potential costs,” the IMF study said.

Some of the risks include greater risk-taking behavior that may undermine stability, delayed reforms and potentially volatile capital flows.