It was a tough start to the week in more ways than one. The losses in many capital markets were extensive, yet they clearly paled in comparison to the lives that were lost and permanently altered in Boston after yesterday's bombings near the finish line of the Boston Marathon.
Today, efforts are underway to figure things out. It is not in our purview to make determinations about what happened in Boston, so we will respectfully and mournfully turn our attention to the capital markets.
Prior to news of the bombings, the focal point on Monday was the pounding the commodities were taking. In particular, selling in the metals complex, highlighted by a 9.5% plunge in gold futures, was extreme and followed on the heels of China's weaker-than-expected first quarter GDP report.
The breakdown in the commodities was startling and it had the semblance of a liquidation trade that eventually evolved into a forced liquidation trade as margin calls were likely exacerbating the losses.
That weakness carried over to the stock market, which provided a source of funds presumably for meeting the aforementioned margin calls.
That was one element weighing on the stock market. The other element was the recognition that China's GDP report, combined with softening data points in the US and Europe, are indicative of a slowdown in global economic activity. That thought manifested itself in the underperformance of economically-sensitive groups.
The energy, materials, and industrials sectors all dropped between 3.0% and 3.9%. The Dow Jones Transportation Average, meanwhile, fell 3.8%. Countercyclical sectors, like utilities (-1.4%) and consumer staples (-1.5%), exhibited relative strength, but they weren't strong as every sector ended Monday with a loss.
There is a bid in the market this morning, however. The S&P futures are currently trading 0.7% above fair value.
A buy-the-dip mentality is helping matters, as is the sight of upward price movement in gold futures (+2.4% to $1393.30), better-than-expected earnings results from Goldman Sachs (GS), Johnson & Johnson (JNJ), Coca-Cola (KO), W.W. Grainger (GWW), and Blackrock (BLK), and a report that March housing starts were at their highest level since June 2008.
In terms of this morning's data, housing starts totalled a robust 1.036 mln units on a seasonally adjusted annualized basis. That was 7.0% above the upwardly revised February level and well ahead of the Briefing.com consensus estimate of 930,000.
The uptick in March was driven entirely by an increase in multi-family construction. Those starts increased by nearly 100,000 units to 417,000. SIngle-family starts, meanwhile, declined 4.8% to 619,000. The latter is still a respectable number (second highest over the last 12 months), but it is reasonable to expect a pullback in total starts in April.
To the last point, building permits declined 3.9% to a seasonally adjusted annual rate of 902,000 (Briefing.com consensus 945,000). That drop was driven by a 10% decline in permits for multi-family units.
Separately, the Consumer Price Index didn't produce any notable headline surprises. Total CPI declined 0.2% (Briefing.com consensus -0.1%) in March, led by a 4.4% decline in the gasoline index. Excluding food and energy, core CPI was up 0.1% (Briefing.com consensus +0.2%).
Over the last 12 months, total CPI is up 1.5% before seasonal adjustment, which is the smallest increase since the 12 months ending July 2012. Core CPI is up 1.9% over the same period. These readings connote that the Fed still has more work to do to meet its inflation mandate.
The Industrial Production report for March (Briefing.com consensus +0.3%; prior +0.7%) will follow at 9:15 a.m. ET.