Weekly Market Outlook – The Lack Of Last-Minute Heroics Last Week Is Telling

The bulls gave it a good go, but the rebound effort that took shape early last week petered out pretty quickly -- right where resistance could have been expected. This time though, the bulls didn't stand up to the selling.

All the technical floors that were in place this time failed to do the job. It was a modest break below key technical floors, but in some regards, that's even worse than a sharp meltdown. (A steep selloff can set up a quick rebound. A slow, meandering selloff can firm up and get going in earnest before anyone even realizes it's happening.)

We'll take a close-up look at the matter below. First, let's recap last week's big economic news and preview what's in the cards for this week.

Economic Data Analysis

The U.S. economy is recovering, but that rebound lost some momentum this month now that the easy part of the recovery is done. The nation's factory output improved 40 basis points last month following the improvement of 3.5% points in July.

Capacity utilization grew from 71.1% to 71.4%, but economists were calling for 71.7%. This is serviceable, but this "leveling-off" isn't anywhere near pre-COVID-19 levels. We'll need to do much better to achieve self-sustaining economic growth.

Capacity Utilization and Industrial Production Charts

Source: Federal Reserve, TradeStation

In the same sense, retail spending continues to grow, but that growth pace is slowing. Retail spending was up 0.6% from July's adjusted levels, or up 0.7%, not counting cars. Analysts were modeling a 1.0% increase for both. Again, this is a step in the right direction, but it's not quite strong enough given the circumstances.

Retail Sales Charts

Source: U.S. Census Bureau, TradeStation

A lot of this tepidness reflects the fact that many people are still unemployed or underemployed.

Finally, last month's building permits and housing starts - like industrial production and consumer spending - were modest. The annualized pace of permits fell from 1.483 million to 1.47 million, and starts slipped from 1.492 million to 1.416 million. The pros were modeling better numbers.

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