For the week, the Dow fell 0.3 percent, while the S&P 500 and the Nasdaq each dropped 1.1 percent. The S&P 500 had traded below its 14-day moving average – 1,647.91 – during the day but closed just couple of points above the level.

This week’s key economic reports …

Monday

China’s new-home prices rose last month in 68 of 70 cities tracked by the government, indicating Premier Li Keqiang will need to maintain efforts to cool the property market even as economic growth slows, according to a Bloomberg report.

Tuesday

Germany’s central bank expects the country’s economy to improve “markedly” in the second quarter — a development that could boost the wider eurozone as it struggles to get out of recession. The Bundesbank said Tuesday that the German economy should expand more robustly after a weak first three months of the year. Germany grew only 0.1 percent in the first quarter in part because cold weather delayed the construction season.

In advance of Wednesday’s release of FOMC minutes, St. Louis Fed President James Bullard said the central bank should continue with its present bond-buying program and adjust the rate of purchases in view of incoming data on growth and inflation. He said the program is the best policy option at the moment and has been effective. New York Fed President William Dudley, vice chairman of the Federal Open Market Committee and an influential voice, spoke about both U.S. and Japan policy in New York Tuesday. He said there is a risk that financial markets could overreact to any move to pull back from easing and the Fed must think “long and hard” about how not to disrupt the economy.

Wednesday

Bloomberg reported that the Bank of Japan board affirmed its plan to double the monetary base in two years as it seeks to end 15 years of entrenched deflation. The BoJ pledged to adjust its unprecedented stimulus program as needed after a jump in bond yields that highlighted risks linked to policy makers’ campaign to revive the world’s third-largest economy. BoJ Governor Kuroda told reporters in Tokyo that the central bank will conduct its debt purchases in a flexible manner, and that the recent volatility in government securities isn’t yet affecting the economy.

William C. Dudley was back in the news in an interview in Bloomberg Television, saying policy makers will know in three to four months whether the economy is healthy enough to overcome federal budget cuts and allow the central bank to begin reducing record stimulus. “I don’t really understand very well how the tug-of-war between the fiscal drag and the improving economy are going to sort of work their way out,” Dudley said in an interview with Michael McKee. “Three or four months from now I think you’re going to have a much better sense of, is the economy healthy enough to overcome the fiscal drag or not.”

Sales of previously owned U.S. homes rose in April to the highest level in more than three years as housing continued to gain momentum. Purchases of existing houses increased 0.6 percent to an annual rate of 4.97 million, the most since November 2009, the National Association of Realtors reported. The median forecast of 79 economists surveyed by Bloomberg called for a pickup to a 4.99 million pace.

Federal Reserve Chairman Bernanke provided testimony to the Joint Economic Committee of Congress, saying that the U.S. economy remains hampered by high unemployment and government spending cuts, and raising interest rates or reducing asset purchases too soon would endanger the recovery. “A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further,” Bernanke said today in testimony to the Joint Economic Committee of Congress in Washington. Monetary policy is providing “significant benefits,” he said.

FOMC minutes caused markets to swoon. Many Fed officials said more progress in the labor market is needed before deciding to slow the pace of asset purchases, according to minutes of their last meeting. A number said they were willing to taper bond buying as early as the next meeting on June 18-19 if economic reports show “evidence of sufficiently strong and sustained growth,” according to the record of the April 30-May 1 gathering. “Most observed that the outlook for the labor market had shown progress” since the-bond buying program began in September, according to the minutes. “But many of these participants indicated that continued progress, more confidence in the outlook, or diminished downside risks would be required before slowing the pace of purchases would become appropriate.”

Thursday

Japanese stocks tumble to their sharpest drop in over 2 years, declining  6.9%. The Topix (TPX) lost 6.9 percent to close at 1,188.34 in Tokyo, the most since March 15, 2011. Volume was the highest on record. Even after today’s decline, Japan’s broadest share measure is still up 2 percent this month and 38 percent for the year. Japan’s 10-year government bond yield touched 1 percent today for the first time in a year.

The HSBC Index (preliminary) of Chinese manufacturing  dropped to 49.6 in May, signaling contraction. In China, the preliminary reading for a purchasing managers’ index was released by HSBC Holdings Plc and Markit Economics. The average forecast of economists called for a reading of 50.4. This compared with a final 50.4 for April. Results below 50 signal contraction.

Initial jobless claims dropped more than expected, to 340,000, down from last week’s revised 363,000. The 4-week average moved down 500 to 340,000. Continuing claims dropped to 2.912 million from 3.024 million.

Sales of new U.S. homes edged up in April to the second-highest post-recession level, as pent-up demand, low interest rates and tight inventories of older homes lift demand. MarketWatch reported that new home sales reached a seasonally adjusted annual rate of 454,000, up 2.3% from an upwardly revised level of 444,000 in March, the Commerce Department. Economists polled by MarketWatch expected an improvement to 430,000 from an initially reported 417,000. April’s gain represents a 29% improvement from the same period of 2012. Median prices jumped 15% year-on-year to $271,600, a record level.

U.S. factory sector appears to be slowing slightly, according to an early reading of May activity released Thursday. Markit’s flash PMI fell to 51.9 in May from a final April reading of 52.1. Markit said the flash PMI reading, which is based on about 85% of the usual number of monthly replies, is the lowest since October 2012 and is “consistent with a moderate improvement in overall manufacturing business conditions.” A reading above 50 mark indicates expansion.

Friday

U.S. April durable goods increased more than forecast in April, pointing to gains in business investment that will help manufacturing rebound in the second half of the year. Bloomberg reported that bookings for equipment meant to last at least three years increased 3.3 percent last month after dropping 5.9 percent in March, the Commerce Department said today. The median forecast from 78 economists surveyed by Bloomberg projected a 1.5 percent increase.

This week’s biggest % gainers/losers:

The following are this week’s top 20 percentage gainers and top 20 percentage losers, categorized by sectors (over $300 million market cap and 100,000 average daily volume).

This week’s top 20 % gainers

• Utilities: EBR (2.97 +16.14%)
• Technology: JASO (8.03 +45.69%), SCTY (48.78 +31.1%), YGE (3.19 +23.17%), VSAT (71.57 +19.78%), GAME (3.59 +19.54%), FLTX (29.74 +18.06%), WFR (7.45 +16.86%), HPQ (24.21 +16.39%)
• Services: WBSN (24.8 +32.08%), SKS (15.49 +30.06%), RUE (42.03 +24.77%), DANG (6.11 +16.37%)
• Industrial Goods: XONE (45 +16.6%)
• Healthcare: MNKD (6.55 +32.75%), ARIA (19.57 +18.03%), INSM (12.93 +17.8%), GTXI (5.89 +16.76%)
• Basic Materials: CENX (9.86 +18.41%), PEIX (4.63 +17.58%)

Thsi week’s top 20 % losers

• Technology: ARUN (13.3 -24.7%), CRUS (17.36 -20.22%), IGTE (14.23 -12.46%), SWI (41.01 -12.14%), SAAS (7.36 -11.67%), RHT (48.49 -9.78%), CAVM (31.85 -9.76%), ADNC (14.77 -9.42%)
• Services: HGG (13.91 -10.55%), SSI (23.26 -10.43%)
• Industrial Goods: ICA (8.04 -22.68%), PGTI (8.03 -11.68%), OSIS (57.85 -11.33%), RAVN (31.26 -11.3%), NCS (15.06 -9.94%)
• Healthcare: IRWD (12.83 -14.25%)
• Financial: BSMX (14.92 -11.47%), APO (25.04 -10.34%)
• Basic Materials: HK (5.54 -11.11%), CHKR (14.32 -10.9%)

Tokyo’s Sell-Off Isn’t a Repudiation of Abenomics (Bloomberg)

Chinese Military Renews Cyber-Attacks — Focus on US Electrical Grid (Oil Price)

Next Xbox Will Face New Array of Rivals (NYT)

These 12 technologies will drive our economic future (Washington Post)

BBC poll: Germany most popular country in the world (BBC)

Why Chinese college graduates aren’t getting jobs (Quartz)

A Keynesian Victory, but Austerity Stands Firm (NYT)

Tesla Still Dependent on Government (Daily Beast)

U.S. infrastructure spending has plummeted since 2008 (WonkBlog)

Who’s the killer employee under Obamacare? No. 50 or 51? (CNN Money)

The Two Charts That Keep Draghi Up At Night (ZeroHedge)

Midreading the Global Economy (Project Syndicate)

Why Americans love the IRS (The Economist)

When Hollywood Wants Good, Clean Fun, It Goes to Mormon Country (NYT)

Ten Brands That Will Disappear in 2014 (24/7 Wall Street)

The charts below are from 3 articles among the daily reads, above. The first, from the Washington Post’s WonkBlog, shows the 12 disruptive technologies that will drive our economic future, according to McKinsey.

This is followed by a chart showing the results of a BBC survey, of more than 26,000 people, who were asked to rate 16 countries and the European Union on whether their influence in the world was “mainly positive” or “mainly negative.” Germany came out top, with 59% rating it positively. Iran was once again the most negatively viewed.

The 3rd chart shows what’s happened to US infrastructure spending, according to the Federal Reserve Bank of St. Louis. U.S. public construction spending as a percentage of GDP has dropped to its lowest point in 20 years, after a big uptick before the recession. This chart is timely, in light of the news another bridge collapsed in Washington state.

Equity related funds currently occupy the number 2, 3, 6, 7, 8 and 9 spots among the top 10 net asset growers over the last 6 months.  Given mutual fund investors are not overly tactical, we expect this trend toward equities to remain stable and provide support for equity markets on dips/corrections.

Of  23 UPGRADES we tracked, 14 are currently rated a Buy in FusionIQ, while 19 are rated Neutral and none are rated a Sell.  Highlighted below are the 18 names which carry IQ Technical Scores of greater than 70. Note that IQ Buy-rated stocks that carry a Technical Scores over 70 are in the bullish zone in our 1-100 ranking system.

This week, of 26  DOWNGRADES we tracked, 16 are rated  a Buy, while 9 are rated Neutral and 1 are rated a Sell. Highlighted below are those 7 names that carry a Technical Score of less than 71 (on a scale of 1-100), which puts them outside our bullish zone.

To access FusionIQ’s alpha-generating stock and ETF ranking system, up to 20 technical trading screens, our new Custom Screener (which offers over 50 metrics by which to screen over 9,000 stocks and ETFs), and exclusive webinars featuring FusionIQ founders Barry Ritholtz and Kevin Lane, we encourage you to start a 14-day free trial:

www.fusioniqrank.com/IQ

My Love Affair with Bonds is Over (Rosenberg/Advisor Perspectives)

Apple: EU Wants to Expose – Its Own Tax Policy? (Insider Monkey)

Jamie Diamond Blackmailed His Own Bank – and Won (New Republic)

BRICS risk ‘sudden stop’ as dollar rally builds (Telegraph)

A Global Rout, But a ‘Healthy Market,’ Lazard’s Art Hogan (MoneyBeat)

Nomura’s Richard Koo Warns on Japanese Economy (ZeroHedge)

How a Big-Bank Failure Could Unfold (Jarsulic & Johnson/NYT)

Freddie Mac: Mortgage Rates Continue Upward Trend (Calculated Risk)

If cable is dying, then why is it still making so much money? (Quartz)

Video: The Seas Strangest Square Mile (Vimeo)

Two of the charts below show hard hitting data points, whereas the 3rd from Gallup addresses the increasing need to work past retirement age.

The first chart, courtesy of FactSet,  shows the healing housing market. House prices are officially surging on tight supply and growing demand. One of the best measures of housing prices, the FHFA Housing Price Index, which is calculated using repeated mortgage transactions on houses with mortgages that end up in mortgage backed securities insured by government entities like Freddie Mac and Fannie Mae. The second chart, from UBS, notes that demographics remain a major structural headwind to raising aggregate demand in Japan. Soft aggregate demand is behind the deflation the BoJ is trying to combat. Finally, the Gallup survey find that three-quarters of U.S. adult workers believe they will continue working past retirement age, with 40% saying they will do so because they want to, and 35% because they will have to. A much smaller percentage — 19% — fit the prototypical retirement scenario of someone who plans to stop working at retirement age by choice.

In a recent Forbes blog post entitled Sentiment Blow Out,  the author examines Ned’s sentiment indicators.  The article suggests that just when it looks as if no more bulls can fit on the bandwagon, another herd hops aboard. The latest NDR Crowd Sentiment Poll compiled by Ned Davis Research has now broken through 70 to a reading of 70.9. This level rivals the most extreme readings of this contrarian indicator over the last 10 years.  Readings this high suggest it is time to watch out for a correction.

Markets fell across Asia, as China’s preliminary PMI came in below 50, signaling contraction in the world’s second largest economy.

Here are a couple of very telling charts from ZeroHedge showing how USD/JPY responded over the day, as well as the price of gold:

ZeroHedge quoted Jim Ried of Deutsche Bank in explaining what happened in the last 24 hours, starting with U.S. markets yesterday:

So at the closing bell, the S&P 500 was 32pts off the highs at 1655 and the UST 10-year yield was 15bps above the lows at 2.0395%. These are big intraday moves. Indeed we haven’t seen such ranges for the S&P 500 and Treasuries since 7th November and 14th September last year, respectively. In other markets the US dollar clearly benefited from the hawkish interpretation of the Fed headlines with Dollar index up nearly 1.2% above the lows while Gold fell over 3% from the intraday highs to close at $1370/oz.

The FOMC minutes that came later was also viewed to be less dovish than the Fed commentary we’ve seen recently as the minutes noted that “a number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently stronger and sustained growth”. Markets clearly seized upon the hawkish tone from yesterday’s Fed headlines even though the Chairman himself at the Q&A session made it clear that a step to reduce the flow of purchases will not be an automatic mechanistic process of ending the program but rather that any change in the flow of purchases would depend on incoming data and Fed’s assessment of the outlook. Whilst a slowing of QE is possible in a few months we can’t help to think that the Fed could be forced to restart its QE in a beggar-thy-neighbour environment where central banks in most part of the developed world are still largely on an easing bias in order to steel a share of the global GDP. We think QE or derivations thereof will be around for many years to come.

Back to markets, the overnight session is basically seeing a continuation of the risk-off flow that dominated the second half of the US session. Asian equities are mostly in the red and the latest Chinese flash PMI is clearly not helping. The HSBC May Flash PMI for China fell to a 7-month low of 49.6 versus a final April reading of 50.4. The May print was not only the first sub-50 print in 7 months but also extends the downward trend that we’ve seen since the end of Q1 as for this particular series the final reading for March, April and May were 51.6, 50.4 and 49.6 respectively.

The rise in Treasury yields is also having an impact on Asian rates markets which saw the 10-year part of the Australia and Japanese curve trace 8bp and 1bp higher. Asian and Australian credit spreads are also 2-4bp off overnight as markets digest the disappointing Chinese PMIs. Other Chinese growth related assets including copper (-2.2%) and AUDUSD (-0.6%) are also coming under selling pressure. The AUD in particular is at its lowest level versus the USD since Q3 2010.

Turning to the day ahead, the flash Euroarea manufacturing and service PMIs for May will be a focal point of the European session. The consensus is for a small 0.2  to 0.4pt improvement in PMIs across the Euroarea, France and Germany. The UK’s Q1 GDP revisions and Euroarea advance consumer confidence data are also worth watching. Across the Atlantic, the US preliminary PMI is out today together with April new home sales, the house price index for March and weekly jobless claims. Mario Draghi and the Fed’s Bullard will be speaking today in London – Draghi’s speech is scheduled towards the end of the US session.

To read the entire post, click here.

Japanese Bond Market Halted At Open As Selling Purge Goes Airborne (ZeroHedge)

Steve Jobs emails that show how to win a hard-nosed negotiation (Quartz)

Irrational Exuberance in Europe? (yardeni.com)

Strategists React to Fed Minutes: Don’t Count on June Tapering (MarketBeat)

Bernanke to Congress: Seriously, guys, what are you doing? (Washington Post)

The banking crisis as a giant carry trade gone wrong (Vox)

America’s Gift to Rival Economies? The Absurd H-1B Visa Cap (BusinessWeek)

SNAP Rolls: Food Stamps Are Elevated for a Reason (Jared Bernstein)

Why Second-Term Scandals Are Almost Inevitable (Bloomberg)

The Number: 4.8% (New Yorker)

The charts below tell a story of how the FOMC minutes led to fears of an early tapering of bond purchases, a spike in yields as the 10-year UST sold off dramatically, and a commensurate intraday selloff in equities. Quartz provided these charts, which are followed by a chart showing the prevalence of violent tornadoes over the years.

Federal Reserve Chairman Bernanke provided testimony to the Joint Economic Committee of Congress, saying that the U.S. economy remains hampered by high unemployment and government spending cuts, and raising interest rates or reducing asset purchases too soon would endanger the recovery. “A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further,” Bernanke said today in testimony to the Joint Economic Committee of Congress in Washington. Monetary policy is providing “significant benefits,” he said.

Below are comments from market strategists, addressing the question of what the Fed has up its sleeve in the months ahead:

Dan Greenhaus, BTIG: “That “a number” saw June as a possible start will be surprising to some but it does reinforce our position that our original view of the “up or down” language was incorrect.  The “proper” reading we now believe is that the FOMC was preparing markets for the eventual withdrawal of stimulus rather than the application of more.  That said, we still don’t think the Fed will slow down in June unless the May employment report is monstrous beyond all current expectations.”

Andrew Wilkinson, Miller Tabak: “Reflecting on the minutes still leaves us with the feeling that it will be a tough sell by those with a hawkish persuasion to win the argument at this time. We readily admit that developments in the labor market are less convincing than we had hoped at the outset of the year and even as the headline rate declines, the slip in the participation rate is clearly registering with not only Mr. Bernanke. The economy continues to expand at a ‘moderate’ pace while some members pointed to the need for more progress before thinking about an exit. Still, it is likely that some reduction of bond purchases might be argued by less-than-dovish policy makers but bearing in mind and as we noted last week, that even dialing back by $10 billion at each meeting would still leave the Fed a net buyer through July 2014.”

Paul Ashworth, Capital Economics: ”Making a switch at the June meeting would make sense because officials are due to update their forecasts at that meeting. In addition, not only is Fed Chairman Ben Bernanke scheduled to give a post-meeting press conference, but he would get a second go at shaping market expectations in his semi-annual Humphrey-Hawkins testimony, usually held in mid-July. What is striking is that “a number” of officials were ready to curb purchases even in the wake of the disappointing March employment report. The April report, which was released after this meeting, included a pick-up in employment last month and some sizeable upward revisions. Nevertheless, judging by the most recent comments from Bernanke that the reduction could happen in the “next few meetings”, we think that the FOMC is still more likely to wait until its mid-September meeting, before it starts curbing its $85bn per month of asset purchases. That would also give the Fed more time to see how congressional negotiations are going over the fiscal year 2014 budget and whether there is any risk of a Federal government shutdown over the debt ceiling. Moreover, even if the Fed opted to start slowing the pace of purchases as soon as next month, it could begin with a relatively trivial reduction to gauge market reaction.”

Alan Ruskin, Deutsche Bank: I do not think this should change views after Bernanke that were largely shaped by his highly conditional comments that the Fed could step down the pace of bond purchases in next few meetings if they see continued job market improvement and confident it is sustained.  Print a strong May employment number and tapering of QE at least by the Sept FOMC meeting will be fully priced in.  Weaker sub 150K type NFP number in May and we will be back to a multi-month wait for numbers that create confidence that the labor market improvement is sustainable.  Market price action has been whippy after the minutes, in part because of the focus on “A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting….”

To read the entire WSJ piece, please click here.

The breakout was accompanied by high volume in many issues, several of which are heavily shorted.  This short interest may add additional upside fuel to the breakout.

Bulls on the sector cite the climate change issue as driving political pressure to spur widespread adoption.  Additionally, rising electricity prices and an aging electricity grid are making solar a viable option.  Last but not least, new markets for solar are opening up.  According to Bloomberg, Saudi Arabia alone is likely to invest $ 109 billion in solar over the next two decades.

In the table below we list all the solar stocks, sorted by there FusionIQ technical rankings.