KSS Kohls Corporation

Is the sell-off in the commodity complex the unwinding of a bubble or a sign of legitimate concerns about the U.S. economy's growth momentum? Or is it a combination of the two?

I would be hard-pressed to characterize recent developments in the silver market as anything but a speculative frenzy. But that is hardly the case in many other commodities, including oil, where supply-demand arguments can reasonably be made.

At the same time, we have been seeing some soft economic readings lately. The sub-par first-quarter GDP growth rate and the ISM weakness do point to underlying softness.

As such, the answer to the question raised above is likely the latter -- a combination of the two. In any case, the pullback in commodity prices is a net positive for the economy by relieving the build-up in pricing pressures.

Today's plate-full of economic reports helps us address this issue to some extent. We had Jobless Claims, PPI, and Retail Sales on the docket this morning. The wholesale inflation number came a shade hotter than expected, while Retail Sales were a tad softer than expected. In the ongoing inflation vs. growth debate, today's reports show growth as the more worrisome variable than inflation.

On the labor market front, we got a reversal in the recent negative trend in the Jobless Claims numbers. Weekly claims fell 44,000 last week to 434,000, essentially reversing the steep rise reported last week.

The Jobless Claims numbers had started moving up in April after steadily coming down earlier in the year. A number of technical and administrative reasons were given for the recent upswing in claims, ranging from issues related to the start of a new quarter to the Good Friday holiday and emergency benefits in Oregon. The sharp drop in today's report bears out those explanations.

On the earnings front, we had a good earning beat from Cisco (CSCO) after the close Wednesday. But the network giant provided a weak outlook, maintaining its recent track record of weak quarterly results. Kohl's (KSS) met EPS expectations, but came short on the top line.

The most important issue for stocks is sizing up the economy's growth outlook. Today's softish retail sales report appears to show that the first quarter's weakness has carried into the current quarter. We may be in trouble if this trend continues in the coming days.
 
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