Weekly Market Outlook – Every Step Forward Is Getting Tougher To Take

Stocks logged a slight gain last week, reversing the prior week's similarly-slight loss. But, as was cautioned a week ago, it's clear the market's big gains since March -- and even since early November - are weighing things down. It's possible the only thing still pushing stocks upward at this time is the calendar.

This is a bullish time of year, and that bullishness tends to last through the first few days of the new year. Of course, this just sets up an even greater potential for profit-taking shortly after that -- and it seems like traders are already exercising caution of that possibility. We'll look at that idea in detail in a moment. First, let's recap last week's big economic announcements and preview what's in the cards for this week.

Economic Data Analysis

The list of economic announcements from last week is lengthy, but not all of that news was terribly meaningful. In fact, there are only 3 data sets that were of interest. In order of appearance:

Last month, the nation's factories once again increased their output, and by even more than expected. Utilization of that capacity grew to 73.3%, and production improved by 0.4% compared to October's output. This is still well below their pre-pandemic peak, but importantly, these two numbers have been heading firmly higher since April.

The trajectory is the key, as that tends to coincide with the bigger-picture direction of the market. (That doesn't prevent short-term ebbs and flows, though.)

Industrial Production, Capacity Utilization Charts

Source: Federal Reserve, TradeStation

Retail sales, however, could be considered disastrous. They actually fell - by any means of looking at them - from October's spending levels. They were still above November 2019's levels, and bear in mind that October's consumerism was oddly strong. The bar was set pretty high.

Still, this doesn't suggest the holiday season is going to be a particularly great one. Perhaps consumers aren't feeling quite as confident and flush as appeared.

Retail Sales Charts

Source: Census Bureau, TradeStation

Perhaps those people are saving up and spending that money on houses rather than gifts. Building permits soared (again) to the highest levels since 2006 - when they were on the way up - and housing starts would have done the same were it not for the surge in starts from January of this year, when interest rates reached their lowest level in years. (Home-buyers should have waited just a few months, though they still locked in great loan deals.)

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