Weekly Market Outlook – Losing Speed At The End Of The Runway

 

It was hardly a catastrophic loss, but it certainly wasn't a gain either. The S&P 500 gave up a couple of points during last week's holiday-shortened action, with the weight of the incredible gains seen since late December clearly keeping many would-be buyers on the sidelines.

This is a point where the market has to make a tough decision. Any more upside progress will most likely be a meltup that takes shape in defiance of the market's valuation, rather than being driven by it. But, given the tepid (and fading) volume seen during this last piece of the 17-week advance, most signs indicate this past week's slowdown is a preamble to a pullback.

Maybe.

We'll examine what's working and not working for the market below, as always, after running down last week's economic news and previewing this week's reports.

Economic Data Analysis

Last month's industrial activity was a bit of a disappointment, at least according to the Federal Reserve's data. Capacity utilization fell from 79.0% to 78.8%, versus an expected rise to 79.1%. And, industrial production fell 0.1% versus an expected improvement of 0.2%. Production was up 0.1% on February.

Industrial Production and Capacity Utilization Charts

Source: Thomson Reuters

This has officially become a concern. Both figures have been edging lower for three months now, even though the market's been in rally mode. The capacity utilization slump along with the slowing industrial production should take something of a toll on the earnings reports due this month and next.

On Thursday we got March's retail sales figures. You'll recall December's report was alarmingly weak. Since then though, consumption has been improving. It's back in full swing now, with the year-over-year improvements almost back to the heyday figures of 2017 and most of 2018.

Retail Sales Growth Charts

Source: Thomson Reuters

Consumer spending isn't the problem it was being made out to be in January.

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