Financial markets are moving higher across the board today as oil has recovered from its early morning swoon, and equity prices continue to march upwards.

Goldman Sachs recently put out a report that markets had moved too far too fast as traders anticipate an V-shaped economic recovery in the United States and possibly the world. Oil is moving higher on anticipated higher demand despite storage facilities in America being basically full.

Yes, the market looks forward but we tend to agree with Goldman. Although it might not retest the lows of the March bottom, we do see another correction near term to dampen the recent one-way market direction.

A quick glance at the consensus for Q1 real GDP leads one to envision a somewhat counterintuitive scenario; a ~4% contraction of the domestic economy followed by the S&P 500 drifting >3000 on progress toward reopening. This would represent just -11.6% from the record highs and put stocks -7.2% year-to-date. The next several trading sessions hold the potential to exaggerate the ‘disconnect’ which continues to create a sense of collective unease with the way in which markets have responded to the pandemic. Habituation of grinding gains creates complacency; this speaks to the prospects for another downside correction in stocks should May see any signs of a resurgence of Covid-19 cases, reports BMO Capital Markets (h/t Zero Hedge).

Economic data released today still shows the effects of the Chinese coronavirus lockdown, meaning it is essentially worthless at this time to predict economic activity.

Wholesale Inventories (Mar) PREL printed at -1.0% vs -0.1% consensus estimate.

Goods Trade Balance (Mar) printed at -$64.22B vs -$62.67B estimate.

S&P Case Shiller Home Price Indices (YoY) (Feb) printed at 3.5% vs 3.3% estimate.

Richmond Fed Manufacturing Index (Apr) printed at -53 vs -6 estimate.

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