Daily Clueless Musings 5/26

The second print of Q1 real GDP growth still shows the economy expanding at a paltry 1.8% annual rate. The much anticipated upward revision did not come, even after yesterday’s upward revised March inventory building and core capital good shipments of durable goods. The number is due to a weaker-than-expected print on consumer spending. More disappointingly, the consumer income is revised down more than the spending, which led to a drop in savings rate from 5.7% to 5.1%. A weaker than expected job market is not doing any help to US consumers. The jobless claims data disappointed, rising 10k to 424k, the seventh straight week claims have stayed above 400k. In the euro land, things are not getting any better. The head of the Eurogroup Jean-Claude Juncker highlighted that the IMF will only release the next tranche of its funding for Greece if the source of Greece's financing needs over the next twelve months is clear. The timing is pretty interesting. At the time of the last review, three months ago, it was assumed that Greece would be able to reaccess capital markets next year. Even the most optimistic people will not believe it is the case anymore. This could be intended to put pressure on Greece and EU/ECB to come up with a resolution. Both GDP and the claims are worse than expected, futures regained strength to continue this run up, after couple days of consolidation. Vols are lower again. Market seems to be less concerned about a credit crisis, even EDU1 participated the rally. Paper started to put on some bearish trades to fate the rally. They bought M2 88-91 P> and sold 96C.