Weekly Market Outlook – A Familiar Ceiling Is Back In Sight

 

Against the odds, the market continued to make forward progress. It wasn't convincing progress, and slowed down when the indices approached record-high territory. But, it was a gain nonetheless. Traders are giving stocks the benefit of the doubt.

This week will be another big test, at a time of year when stocks don't typically perform well. They're already going against the grain in that regard, thanks to some encouraging chatter on the trade-relations front. It remains unclear if the chatter itself is the only thing driving stocks higher than they are already. The economic backdrop is pretty good as is.

To that end, we'll take a look at the key economic data before we start dissecting the broad market. There's a lot to add to the backdrop.

Economic Data Analysis

Last week was a busy one, though not a great number of last week's announcements were hard-hitters. In fact, only two sets of data stood out... last month's inflation information, and last month's retail sales. The inflation information is particularly important headed into this week, as the FOMC will be making a decision about interest rates on Wednesday.

In short, despite low interest rates, inflation remains tame. Core consumer inflation (not counting food and energy price increases) popped, but even at 2.39%, that's manageable. Those price increases are also being offset by lower prices of other goods, though even then, August's price hikes feel like something of an anomaly. Also notice that the nation's factories and production plants are seeing practically no inflation to speak of.

Consumer, Producer Inflation Charts

Source: Thomson Reuters

The other biggie was retail sales. They were solid, suggesting consumers aren't sweating anything, and explaining the underlying demand that ratcheted consumer prices higher. Overall retail sales were up 4.6% year-over-year, improving for a third month in a row.

Retail Sales Growth Charts, Year-Over-Year

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