The “slowing growth” theme we’ve been discussing
has now worked its way into the headlines. Today’s
ADP report that the private
sector added a less than expected 179,000 jobs in April is being billed
as a sign that the recovery is not moving as fast as we’d like.

Today’s oil inventory report is also being
interpreted as measure of slowing growth. Crude inventories rose 3.2
million barrels last week, higher than expected.

But what’s ironic is that oil inventories have
been consistently rising for months and it’s had no impact in pricing, or
on economic growth sentiment.

This should tell us that the interpretation of
economic data can be very subjective. We may in the midst of a sentiment
change toward the economy and the stock market. And don’t miss the fact
that such a shift is taking place as the S&P 500 has pushed toward an
important resistance level at 1,377.

There’s also the “sell in May” theory which
clearly happened last May.

*****Also, I know we are not missing the fact that
this potential shift in sentiment is coinciding with the Fed’s latest
revelations that inflation is increasing, QE2 will end in June and
interest rate hikes are not imminent.

Once again, the Fed missed an opportunity to tout
a strengthening economy as the reason QE2 was ending. Instead, the Fed
admitted that QE2 is inflationary and may not provide the hoped-for
benefits.

While I applaud the Fed for being candid, the
result is that the Fed is seemingly admitting that it doesn’t really know
what it’s doing. Needless to say, that’s not a helpful message.

The U.S. dollar has certainly been responding to
the Fed’s latest statements. The weaker dollar has not translated into
higher commodity prices, another bit of evidence that we may be
witnessing a shift in sentiment toward stocks.

*****TradeMaster Daily Stock
Alerts
Jason Cimpl had
alerted me to an important catalyst for the U.S. dollar. The European
Union will make a decision on interest rates tomorrow.

A hike on Eurozone interest rates would likely
push the U.S. dollar lower. However, if the EU decides to keep interest
rates steady, it could lead to a rally for the dollar. Jason tells me the
market is expecting a rate hike.

At this point, I suspect a little upside for the
U.S. dollar would be good for the
U.S. stock market.

Published by Wyatt Investment Research at