7 Gut checks before market opens

Need to Know APRIL 15, 2013 7 gut checks before the stock market's opening bell   WikiMedia Commons Good morning. If you went home Friday hoping the worst of the damage was over for gold, you may want to pull the covers back up over your head. It's ugly out there. The carnage in gold and other precious metals markets is prompting questions about what role commodities should play in the average investor's portfolio. According to Cullen Roche at the Pragmatic Capitalism blog, the correct answer is "almost none." "If one actually takes a look at the long-term real returns of commodities you realize they're actually quite dreadful," Roche noted. "Even if we cherry pick a decent period that includes a big boom like the last 20 years, we still see pretty awful performance.  Over the last 20 years commodities have returned just 1.6% per year over the last 20 years   That's a real return of about MINUS 1%." Roger Nusbaum at the Random Roger blog sees a role for gold  as insurance against when external shocks drive down equities -- scenarios in which gold is likely to go up. But Nusbaum says big gold selloffs like this one always make him think about the investors who've been told by pundits to keep 20% of their portfolios in gold. "Gold is capable of very large declines, which is important to consider when sizing it up for your portfolio." Key market gauges: Asian stocks were slammed and European equities  were taking it on the chin after a weaker-than-expected rise in first-quarter China gross domestic product. U.S. stock index futures were nursing moderate losses, however, with pressure tempered by apparent optimism over corporate earnings. But it's gold and other precious metals that are in the spotlight. Gold futures tumbled more than $100 an ounce at one point to a two-year low and remain down more than $80 an ounce at $1,420.40 after falling into bear-market territory Friday. The economy: Indeed, it's the Chinese data that appears to be calling the tune after first-quarter gross domestic product grew 7.7% compared to a year earlier, falling short of expectations for growth of 8%. Those evident worries about global growth won't be soothed by Monday morning's Empire State manufacturing index from the New York Fed. The index remained in positive territory but fell more than expecte d to 3.1 from 9.2 in March. The  National Association of Home Builders index, coming up at 10 a.m. Eastern, is expected to tick up to 46 in April from a March reading of 44. Earnings:   Citigroup Inc.   topped Wall Street estimates as first-quarter profit rose to $3.8 billion, getting the ball rolling on a busy week that will see a third of the Dow Jones Industrials report. Citigoup rose nearly 2% in premarket trade. The buzz: No surprise. It's all about gold and precious metal ETFs, such as SPDR Gold Shares and iShares Silver Trust over at StockTwits . Deals were also in focus Monday. Satellite-TV provider Dish Network Corp.  will be in focus after making a $25.5 billion bid for Sprint Nextel Corp. . Thermo Fisher Scientific announced it would acquire Life Technologies for about $13.6 billion in cash. And Microsoft  was trending on Google as the company works up plans for a touch-enabled watch. The chart of the day: The Short Side of Long blog notes that it's "full crash mode" for gold and silver, but that isn't shaking its bullish gold position. Short Side of Long The gains from the 2008 lows remain "tremendous" and it's only normal for the price to pull back at least 20% to 30% before the bull market continues, the blog says. The call of the day: While the China data did gold no favors, the Australian dollar is also getting whacked. The Aussie is down nearly a full percentage point versus its U.S counterpart at $1.0408. The currency is particularly sensitive to China data given Australia's massive trade flows with the country, which means the Aussie can also serve as a canary in the coal mine when it comes to global growth. "Whether this is merely a pause or the start of a more malignant problem for the global economy remains to be seen, but it is not surprising that Aussie, which is the key barometer of risk appetite, has reacted so negatively to the news," said Boris Schlossberg, managing director of FX Strategy at BK Asset Management. " In fact the whole commodity currency block, which only last week was setting fresh monthly highs on the back of renewed demand for the carry trade, has now seen a very sharp correction today as gold, silver and oil continue to tumble. If risk aversion flows continue to accelerate in North American trade AUD/USD could break the $1.0400 level and test the key $1.0350 support." Random reads: Tiger Woods isn't the first golfer to play on at the Masters after he should have been disqualified. Perhaps he can thank Dow Finsterwald . The 10 highest-paid hedge-fund managers. David Stockman offers up bad economics, but "excellent preaching." --William L. Watts Follow on Twitter: @wlwatts Get the latest news on our mobile site: http://www.marketwatch.com/m MarketWatch has sent you this newsletter because you signed up to receive it. To ensure you receive this newsletter in the future, please add marketwatchmail.com to your list of approved senders. Sent to: alanrussell@princetoncap.com Unsubscribe | Subscribe Copyright 2013 MarketWatch, Inc. All rights reserved. MarketWatch, the MarketWatch logo, and BigCharts are registered trademarks of MarketWatch, Inc. By using this site, you agree to the Terms of Service and Privacy Policy (updated 6/26/07). MarketWatch - Attn: Customer Service, 201 California St., San Francisco, CA 94111