MARKET WRAP – STOCK CLOSE SHARPLY LOWER

Stocks closed sharply lower as the Monday Melt-up failed to materialize.  Investors who piled into the market in those final 15 minutes of Friday afternoon were surely disappointed by today’s market action.   Equities were listless all day until later in the afternoon when stocks dipped over 1.3%.  The Euro was very weak on the session and credit  markets continued to weaken as the LIBOR/OIS spread widened and the TED spread jumped again.  Volume was moderate on the day and breadth was marginally negative.  The message from the credit markets and currency markets appear clear – nothing has been resolved in Europe so it’s difficult to justify a change in the downtrend in equities until a fundamental change occurs.

From Daily Futures:

U.S. Economy
The National Association of Realtors said that existing home sales were at an annual rate of 5.77 million units in April, up 7.5% on the month and more than expected. The June 2011 eurodollars are trading lower.

The Chicago Federal Reserve’s index of national activity increased from +.13 to +.29 in April.

The National Association of Business Economists said that they expect real GDP to be up 3.2% this year and in 2011.

Grains and Cotton
The USDA said that last week’s export inspections of:
Corn totaled nearly 40 million bushels, up 29% from a year ago.
Soybeans totaled 3.9 million bushels, down 79% from a year ago.
Wheat totaled 20.3 million bushels, up 3% from a year ago.
July corn is steady to higher.

Livestock
After Friday’s close, the USDA said that frozen pork in storage was down 21% from a year ago and much less than expected. August hogs were up .32 at 82.65.

After Friday’s close, the USDA said that there were 10.453 million head of cattle on feed as of May 1st, down 3.4% from a year ago and slightly less than expected. August cattle closed down .42 at 90.20.

Sugar
After Friday’s close, the USDA said that world production of sugar will increase from 152.2 to 163.8 million tons in 2010-2011, but ending stocks will only increase by 504,000 tons to 27.02 million tons. The big estimated increase in consumption seems too good to be true. July sugar closed down .46 at 15.19.

Coffee
With a large coffee crop on the way, Brazil’s growers have asked the government to stockpile some of their production in an effort to support prices. The government is expected to make its decision sometime this week. July coffee ended down .0015 at $1.3225.

Metals
August gold closed up $17.90 at $1,195.80, finding support from ongoing concerns about the euro and rising tensions between North and South Korea.

July copper closed up 8.65 cents at $3.1475, helped by bargain-hunting.

Currencies
The June euro is trading lower after the Bank of Spain was forced to take over one of its savings banks, CajaSur, over the weekend.

New vehicle sales in Australia were up 8.4% in April, the biggest monthly increase in over nine years.

Japan’s government said that its All Industry Activity index was down .8% in March, roughly as expected.

Markets in Canada are closed today for Victoria day.