Weekly Market Outlook – Good, But Not Great

 

Following through on the previous week's bullishness, the bulls came back from the Fourth of July weekend still in a buying mood. They were tested to be sure, and for a while the market was even in the red for the week. When push came to shove though, it was the bulls doing most of the shoving.

There are still a couple of problems with the move, however. While the market finished the week on a high note, participation in that gain was tepid. The S&P 500 index also failed to close above highs hit early in the week. The buyers will need to prove a little more of their mettle if they're going to get other buyers off the sidelines and into the game.

We'll take a detailed look at the matter below. First, however, let's run down last week's big economic news and preview what's in store for this week.

Economic Data Analysis

A rather light week last week, though what little news we got was more encouraging than not.

Among the good news was last month's ISM Services Index figure. Like the manufacturing version of the index, the services measure jumped in a big way, and by far more than expected. Economists were only calling for a move up to 49.0, but it actually popped to 57.1. That's well above the make-or-break 50 level that defines "good" or "bad."

ISM Index Charts

Source: Institute of Supply Management, TradeStation

We also got an early look at the inflation landscape on Friday, with June's producer inflation numbers. Surprisingly, input prices fell rather than grew as expected.

PPI Inflation Rate Charts

Source: Bureau of Labor Statistics, TradeStation

It remains to be seen if this is a reflection of tepid demand or just a hint of volatility. But, it seems more like the latter. This week's look at consumer inflation will help flesh out this picture.

The only other item of interest from last week (and we've not charted it) is May's JOLTS, or job openings, report. Not surprisingly, openings of 5.4 million not only suggests the economy is ready to get back to full speed, it was much better than the 5.0 million the pros were modeling. Just keep in mind that figure was for May, and not June, and much has happened in the meantime.

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