Bad News Is Once Again Good News

Economic Data

- (UK) May CBI Industrial Trends Total Orders: -5 v +3e; Selling Prices: +2 v -3 prior
- (IE) Ireland Apr PPI M/M: 0.1% v 3.4% prior; Y/Y: 9.0% v 9.5% prior
- (BR) Brazil Apr Unemployment Rate: 6.4% v 6.3%e
- (US) Initial Jobless Claims: 274K v 270Ke; Continuing Claims: 2.21M v 2.23Me
- (US) Apr Chicago Fed National Activity Index: -0.15 v 0.00e
- (MX) Mexico Q1 GDP Q/Q: 0.4% v 0.3%e; Y/Y: 2.5% v 2.4%e; GDP Nominal Y/Y: 4.8% v 5.8%e
- (MX) Mexico Mar Economic Activity Index (Monthly GDP): 2.7% v 2.6%e
- (RU) Russia Apr PPI M/M: 2.7% v 1.0%e; Y/Y: 15.0% v 13.3%e
- (ZA) South Africa Central Bank (SARB) left its Interest Rate unchanged at 5.75% (as expected)
- (US) May Preliminary Markit Manufacturing PMI: 53.8 v 54.5e
- (US) May Philadelphia Fed Business Outlook: 6.7 v 8.0e
- (US) Apr Existing Home Sales: 5.04M v 5.23Me
- (US) Apr Leading Index: 0.7% v 0.3%e
- (EU) Euro Zone May Advance Consumer Confidence: -5.5 v -4.8e
- (US) Weekly EIA Natural Gas Inventories: +92 bcf v +94 to +99 bcf expected range

European indices closed at their highs and US stocks are not far off session highs as today's bad news is just bad enough to look like good news to market participants. The message seems to dovetail with yesterday's FOMC minutes, which suggested that even September might be too early for Fed rate hikes. As of writing, the DJIA is up 0.07%, the S&P500 is up 0.25% and the Nasdaq is up 0.34%.

Two May economic data points out this morning were notably weak. The headline Markit May manufacturing PMI reading was softer for a second consecutive month, dropping to its lowest level since January 2014. Overseas markets continue to be a source of trouble: exports have fallen for two months and manufacturers warned the strong dollar was a big drag on their competitiveness in external markets. Meanwhile the May Philly Fed outlook dropped to 6.7 from 7.5 in April (which had been a four-month high). Note that the New order component was much higher than April's nearly flat figure, somewhat offsetting the weaker headline. The April existing home sales were strong, echoing the robust April starts data out on Tuesday.

The crude bounce-back peaked just shy of $64 about two weeks ago and since then prices have floated lower. The drawdowns seen in API and EIA weekly inventories data hardly arrested the gradual moves lower, but today's bad-news-is-good-news dynamic has pushed WTI back toward $61. EUR/USD has traded in a tight range between 1.1080 and 1.1180 over the last 12 hours as the euro seems to have foun da floor.

Shares of Best Buy are off their highs this morning in the wake of a very good earnings report, up 5% after rising as much as 8% in the premarket. EPS topped expectations while revenue and comps were in line. Both revenue and earnings were down considerably on a y/y basis, although comparisons are tough given the firm is winding down its Canada operations. CRM remains up 5% or so after beating expectations and raising guidance.

CVS Health reached a deal to acquire pharmacy services provider Omnicare for about $12.7 billion, or $98 per share in cash plus $2.3 billion of Omnicare's debt. Omnicare is the largest provider of pharmaceutical services in nursing homes in the US and has 160 locations in assisted living and long-term care facilities in 47 states.

Looking Ahead

- 13:00 (US) Treasury to sell 10-Year TIPS Reopening
- 13:30 (EU) ECB's Draghi at ECB conference in Portugal
- 14:00 (US) Fed Vice Chair Fischer at ECB conference in Portugal
- 19:00 (EU) ECB's Draghi in Sintra
- 19:00 (US) Fed's Williams in Stanford
- 17:00 (CO) Colombia Mar Trade Balance: -$1.0Be v -$1.3B prior; Total Imports: $4.6Be v $4.6B prior
- 20:30 (TW) Taiwan Apr Unemployment Rate: 3.8%e v 3.8% prior
- 23:00 (JP) Bank of Japan (BOJ) Policy Statement/Kuroda Press Conference
- (AR) Argentina May Consumer Confidence Index: No est v 52.9 prior