Market Comments: As of May 2014
The U.S. 1st quarter GDP annual rate was revised down from a 0.1% expansion to a 1% contraction. Negative contributions included declining inventories, a decrease in net exports, and less nonresidential investment, but final demand from consumers was unchanged and remained in positive territory. Market reaction to this was largely non-existent, and the revision was expected, and recent positive data from the housing sector, manufacturing surveys, and the labor market point to a strong pick-up in growth in the 2nd quarter. The S&P 500 produced a 2.35% gain for the month and is now up close to 5% for the year. The Ten-Year Treasury yield, which had been trading in the range of 2.6% to 2.8% recently, fell through that support level to the end of the month at 2.48%. Though this can be partially attributed to apprehension around a slowing economy after a poor start to the year, this drop was likely a result of other exogenous factors such as a potential monetary easing from the European Central Bank, a shrinking U.S. budget reducing supply, and traders closing out their short positions.