US Dollar, Japanese Yen Fall as S&P 500 Breaks Above 200 SMA

The US dollar and Japanese yen both fell lower on Monday, though the latter was the weakest of the majors, as investor sentiment continued to build despite the fact that General Motors Corp. unsurprisingly filed for bankruptcy protection, reporting $82.3 billion in assets and $172.8 billion in debt, with the US government set to hold a 60 percent stake in the new entity by converting the bulk of its $50 billion worth of loans. Indeed, risk appetite was so strong that the DJIA rallied 2.6 percent for a test of its 200 SMA at 8765 while the S&P 500 also jumped 2.6 percent, breaking above its 200 SMA at 927, but closing below its former 2009 high of 943.85.

Looking to the day’s US economic data, the Commerce Department said that personal income growth rose by 0.5 percent during April, but with the savings rate now up to a 14-year high of 5.7 percent, personal spending fell negative for the second straight month at a rate of -0.1 percent. A further breakdown of the report shows that rising wages certainly aren't the source of the growth in income. Instead, transfer payments, which include government benefits like social security, unemployment insurance, and disability, contributed the most registering a 2.3 percent increase. Meanwhile, the Institute for Supply Management's (ISM) index on manufacturing conditions rose more than expected to 42.8 in May from 40.1. While this is still below 50, signaling a further contraction in business activity, the moves suggest that the downturn in the sector is not accelerating. Furthermore, the new orders component rose above 50 for the first time since November 2007, suggesting that demand is finally starting to grow once again, while the price component surged to 43.5 from 32.0, helping to alleviate deflation concerns.

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