• The earnings beat rate is declining since the start of the season (via Bespoke).

• The ISM services index dropped sharply and missed expectations.  Steven Hansen notes the decline, but focuses on the overall trend.  See his complete report.
• Employment growth for April was poor.  The payroll jobs gain was not enough to reduce unemployment.  The reduction in the unemployment rate came from a reduced labor force, not more jobs.  We did not see improvement on hours worked or the hourly wage.  The household survey showed a decline in jobs.  Steven Hansen at GEI includes some ideas and charts you probably did not see elsewhere, concluding that it is not pretty, but there is continuing  modest economic expansion.

Steven is consistent in his analysis, unlike others who, for example, only talk about the household survey when it declines.  It has actually been showing much greater increases than the payroll approach.  Eventually the two come into line.

This was the big report of the week.  It turned out to be an anti-Goldilocks number:  Not strong enough to reassure about growth, nor weak enough to suggest more QE from the Fed.

The Ugly

This week's "ugly" award has to go to the stock market, where the reaction was disproportionate to the employment data.  There were clearly many itchy fingers looking for confirmation of the "sell in May" meme.  Charles Kirk provides the evidence:

Part of the decline was a reaction to stories about Apple suppliers.  Jay Somaney, in his trading diary at Wall Street All Stars) pointed to the real story -- a change in the needed parts -- bad for suppliers but not for Apple.

The Silver Bullet

I occasionally give the Silver Bullet award to someone who takes up an unpopular or thankless cause, doing the real work to demonstrate the facts.  Think of The Lone Ranger.

This week's award goes to Silver Oz, writing at The Bonddad Blog, for his article, Once Again Zero Hedge is Completely Clueless.  One of the Tyler Durdens at ZH managed to mis-represent both the seasonal adjustment process and the birth/death adjustment in making the jobs report seem even worse.  Silver Oz points out the errors and concludes as follows:  

"Chalk this up as yet another reason to NEVER, EVER listen to Zero Hedge when it comes to interpretations of statistical reports."

Trying to correct these errors is a really thankless task.  Many of the ZH arguments have just enough data and apparent plausibility that effective refutation is very time consuming and provides little payoff.  This is why so much bogus analysis lead the Internet hit parade.

The Indicator Snapshot

It is important to keep the current news in perspective. My weekly snapshot includes the most important summary indicators:

• The St. Louis Financial Stress Index.
• The key measures from our "Felix" ETF model.
• An updated analysis of recession probability.

The SLFSI reports with a one-week lag. This means that the reported values do not include last week's market action. The SLFSI has moved a lot lower, and is now out of the trigger range of my pre-determined risk alarm. This is an excellent tool for managing risk objectively, and it has suggested the need for more caution. Before implementing this indicator our team did extensive research, discovering a "warning range" that deserves respect. We identified a reading of 1.1 or higher as a place to consider reducing positions.

The C-Score is a weekly interpretation of the best recession indicator I found, Bob Dieli's "aggregate spread." I'll explain more about the C-Score soon. Bob also has a group of coincident indicators. Like most of the top recession forecasters, he uses these to confirm the long-term prediction. These indicators are not close to a recession signal.