Market Direction Week of May 9, 2016

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Last Week Review: The stock market’s performance last week suggested investors should consider taking some profits. Stocks were lower for the third week in a row as renewed concerns regarding global growth prospects have put pressure on investor sentiment. Additionally, recent domestic economic data has not been as robust as many had expected. Month-to-month economic readings can be choppy, and it's likely that incoming data will continue to alternate between soft and strong for the time being. But we think the broader trend remains consistent with a modest pace of growth, and we expect stocks to grind higher from here with some bumps along the way. Prepare for those bumps with a well-balanced portfolio that is positioned with the right mix of stocks and bonds. This can help you stay on track toward your goals, even when the market's path gets a bit choppier.

 How the market finished last week, the S&P 500 down 0.4%, the Nasdaq down 0.8%, and the Dow down 0.2%.

This Week: In 12 of the past 16 years, there has been a sell-off that began in May. While the magnitude and duration has varied widely, 2014 was the only year without any mid-year decline. A few times, the selloff has started about a week early or a week late. If the current trend continues, it looks like we have started early again in 2016.

The weakest employment report in 7 months and continued fears about the European recovery and Chinese economy have halted equities, despite relatively stable oil prices and plenty of upside earnings surprises.

The S&P 500 has pulled back to 4-week lows, but technical support and low volatility indicate the downside should be relatively limited from here. The consensus of the indicators for next week is volatile, but with most of the bad news already out and room to move to the upside.

Economic Calendar: JOLTS (5/10), Import and Export Prices (5/12), Retail Sales (5/13), PPI-FD (5/13)

Some of the major earnings announcements on deck: AGN, DIS, M, JWN, SHAK.

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