Are Bulls Resting Before the Next Run?

Weak economic reports and fears over Europe put U.S. stocks and ETFs on edge as they struggle for higher ground.

Today started with good news as the Department of Labor reported a decline in weekly jobless claims from 388,000 last week to 378,000 this week.

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But the good news for unemployment was quickly dampened by the Institute for Supply Management’s Non Manufacturing Index for April which declined to 53.5 from a reading of 56 in March, dropping to a much lower level than the expected 55.9.

Readings above 50 indicate expansion, however, today’s reading adds to the view that the U.S. economy is starting to slow along with Europe and China.

Today’s report comes on the heels of ADP’s private employment report which showed that hiring in April fell to levels last seen more than six months ago, slowing to 119,000 from 201,000.

Meanwhile in Europe, European Central Bank President Mario Draghi left the ECB’s lending rate at 1% as he’s worried about the delicate state of the economy in Europe.

Retail was also weak as big chains like Target and Gap missed their April sales performance figures.

The Dow Jones Industrial Average (NYSEARCA:DIA) dropped 62 points while the S&P 500 (NYSEARCA:SPY) dropped 0.77%.

The Nasdaq 100 (NYSEARCA:QQQ) shed 1.1% and the Russell 2000 (NYSEARCA:IWM) dropped 1.46%.

The Nasdaq (NYSEARCA:QQQ) and S&P 500 (NYSEARCA:SPY) are just above their 50 day moving averages while the Russell 2000 (NYSEARCA:IWM) has dropped below its 50 day average, indicating short to intermediate term weakness ahead.

Europe ETFs continued to be weak today as iShares MSCI Germany Index (NYSEARCA:EWG) dropped 1.1%, iShares MSCI Spain ETF declined 0.64% and Vanguard Europe ETF declined 0.80%.

Tomorrow’s big news will be the widely watched and widely anticipated April Non Farms Payroll Report due to be issued at 8:30 a.m. Eastern Time.

Bottom line:  Major global markets continue to have a bearish bent on slowing growth and weak economic reports.  If the declines continue and are confirmed, opportunity could be found on the “short” side of the market as we head into May.

John Nyaradi is the author of The ETF Investing Premium Newsletter.

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