Weekly Market Outlook – Hurdles Ahead, But We’ve Got The Speed We Need

 

When the year-end rally fizzled out early this year, and then completely shattered on Thursday, investors were understandably concerned. When push came to shove as the week came to a close though, it was the bulls doing all the shoving. Ignoring the risks, the buyers drove the S&P 500 up by a whopping 3.4% on Friday, leaving the index at its best close in two weeks. The reversal is on respectable, even if not rock-solid, footing.

Better still, other clues point to more bullishness ahead... as long as politicians are able to stay out of the way.

We'll look at the reversal effort below. First, however, let's recap last week's economic news, which included a surprisingly encouraging jobs report for December.

Economic Data Analysis

The holiday further reduced the already limited number of economic announcements to sift through last week, but a handful of the ones we heard were hard-hitting.

The party started in earnest on Thursday, with last month's ISM Manufacturing Index rolling in notably lower than expected. The measure fell to a multi-month low of 54.3.

ISM Index Charts

Source: Thomson Reuters

It's reason for concern, though not a reason to overreact just yet. The lull may be the result of a combination of factors like seasonality, weather and politics, most of which are transient. Manufacturing data outside of the ISM circle actually still shows respectable strength. Hiring within the manufacturing sector, for instance, remains quite firm.

This week's ISM non-manufacturing index report may round out the look at the economy through this lens. The pros are calling for a slight December lull, but the index is still at robust levels.

Also on Thursday we heard about December's automobile sales. Not bad. They didn't lurch forward, but the annualized pace of 17.55 million is steady with the readings seen for the prior couple of months.

Automobile Sales Charts

Source: Thomson Reuters

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