The so-called hard economic data is starting to raise some eyebrows
Hard economic data is pouring rain on the market's march back to record levels. Numbers out Tuesday showed retail sales declined 0.9% in May , more than the expected 0.6% slide. Data released Wednesday didn't help either. Housing starts fell to an annual rate of 1.265 million in May, well below a Dow Jones estimate of 1.35 million. Building permits came in at a rate of 1.393 million for the month, also missing the 1.42 million consensus. "The hard data on a weakening economy is picking up momentum," Evercore ISI fixed income strategist Stan Shipley wrote ahead of Wednesday's data releases. "Housing starts remain well below long term demographic demand but are above recession signaling readings," Shipley said. "If housing starts are greater than 1.20 million, the U.S. economy is unlikely to slip into a recession. But if higher oil prices crater consumer spending and home demand, then housing starts could drop to 1.00 million or less which would signal a recession." The softening economic numbers come as the S & P 500 approaches the all-time highs set in February. After falling about 20% at the height of the global trade scare in April, the broad market benchmark now stands 2.7% below its record. .SPX 3M mountain SPX in past 3 months But that rebound could stall out if the economic numbers continue to deteriorate. "U.S. data for May reinforced signals that the early-year boost to activity has started to fade," wrote JPMorgan economist Nora Szentivanyi. "The continued rise in import prices suggests the tax bite is being felt domestically even if price increases for consumers are likely to be more delayed and drawn out than previously anticipated," she added. "A broad range of companies plan to increase goods prices in coming months and we continue to look for a material rise in consumer prices related to tariffs." Investors will get more clues on the state of the economy Wednesday, when the Federal Reserve releases its latest monetary policy decision and its quarterly Summary of Economic Projections.
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