Stocks finished the day mixed with the Dow up and the NASDAQ down. At the close the Dow gained 9 points on flat volume to close at 17,720. Stocks remain under pressure. Apple was whacked which led the NASDAQ lower.
The department store sector is lower after Macy's reported upsetting numbers and warned about future sales trends. Shares of department stores fell on the news and the gurus are scratching heads over the disconnect between a decent economy and slowing sales. Savings rates are higher and some feel that consumers are spending more on “needs based” items like rent and healthcare instead of general consumption items like fancy new shoes or shirts. Macy’s reported a 7% decline in sales and a 29% decline in profits.
According to a Bloomberg article about trends in the bond market, unprecedented demand from domestic and global investors is pouring into US govt., investment grade corporate and long (30 – 50 year) bonds issued by Portugal and Spain. Global demand for bonds with positive yield has swelled to nearly $9 trillion and this lemming like rush began when the ECB and the Bank of Japan decided to go negative on interest rates. How this plays out is anyone’s guess but with all these buyers going long they are in effect betting that the Federal Reserve will not raise rates at the June meeting. If however Janet Yellen can unite the Fed and increase rates then it could spell pain for these bond holders. The next fed meeting on June 15th is shaping up to be the most watched event since ……..well……the Thrilla’ in Manila when Ali took on Smokin’ Joe Frazier!
The picture as to why gold demand has been up 21% so far this year is starting to come into focus. The gold bugs now attribute the record setting gold buying binge to 3 things. “NIRP” or negative interest rate policies in Japan and Europe leads the list, Chinese currency devaluation holds the number two spot and a slower pace of Federal Reserve interest rate hikes in the face of a slowing global economy brings up the rear. The first two items speak to the notion that investors could be losing confidence in central bank’s ability to spark growth. Gold closed the day down $5.80 an ounce to $1,269.