Weekly Market Outlook – That’s What Happens When You Play With Fire

The recovery effort that took shape early last week was already struggling headed into Friday's action, unable to push above the 50-day moving average line. But, when the rug got pulled out of from underneath that effort on Friday, it did so in spades. The 3.0% tumble the S&P 500 took on Friday translated into a 1.1% setback for the week. The close at 2847 was the lowest weekly close since late May.

Though the renewed selloff was scary and a little painful, it's also not done a tremendous amount of damage yet. From its peak, the S&P 500 is still only down 6% from its high. That's not normally enough to constitute a full-blown correction, and this particular pullback is taking shape after an abnormally big runup. Even with the stumble, the index hasn't even tested the pivotal 200-day moving average line.

We'll take a detailed look below, as always, after reviewing last week's economic announcements and previewing this week's.

Economic Data Analysis

It was easy to overlook, given all the noise the Federal Reserve and its chiefs were able to make. But, last week, there was a handful of noteworthy economic news.

It was a particularly big week on the real estate front, with existing home sales being reported on Wednesday, followed by new home sales on Friday. The results were... mixed, and mostly uninteresting. Sales of existing homes rolled in at a pace of 5.42 million, slightly more than forecasted and measurably more than the June figure of 5.29 million. New home sales hit an annualized rate of 635,000 in July, down from June's strong clip of 728,000, and short of the 645,000 economists were expecting.

New, Existing Home Sales Charts

Source: Thomson Reuters

Still, it's arguable that home-buying is growing again, even if erratically.

The only other item of interest last week wasn't something we previewed a week ago, but merits a closer look all the same. That's the amount of crude oil the U.S. has stockpiled, and to a less meaningful degree, the amount of natural gas now in storage. Crude inventories fell by 2.7 million barrels after the prior week's 1.6 million. Several weeks ago, inventory levels were on the rise again, suggesting the industry hadn't remembered the lessons of overproduction taught in 2015. That risk subsided quickly and decisively though.

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