Not clear how to add up today's market action. My take is the market thinks the pickup in growth is a head fake. The weak dollar and treasury rally indicate the market is not convinced the economy is strong enough for Fed tightening. The weak stock market selloff and the rotation out of cyclical sectors into telecom and staples indicates the market is not bulled up on economic growth.
In my opinion, the pickup in growth is robust, and the economy is strong and ready for Fed hikes. Thursday retail sales number will settle this debate on the pickup in growth. If retail sales have a strong rebound from April's disappointment, then the growth pickup is intact. If retail sales disappoints again, then the stock market may be in a real pickle. Today's market action is quite a disappointment after Friday's strong NFP.
Michael Grove, CFA