Weekly Market Outlook - Pullback Averted For Now, But Gains Still Weigh

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Not bad. The market was dancing with the idea of a pullback, logging three straight days of lower highs after Monday's pop. When they had to make the tough decision headed into the weekend though, investors felt the biggest risk was not being in the market. Friday's gain of 0.69% left the S&P 500 at its highest close since early November.

Still, there's good reason to worry that the rally - at least this leg of it - is coming to an end. Whether or not we 'reset' and renew the rally without taking on too much damage depends on what happens this week.

We'll weigh it all below, as always, after running down last week's economic announcements and previewing this week's economic news.

Economic Data Analysis

It was sometimes difficult to notice, between dueling political stories form Vietnam and Washington DC. But, last week was unusually busy in terms of economic news, with the federal government finally able to play 'catch up' with some of the reports that had been postponed due to the government shutdown. We'll have to limit our look to the highlights, and examine them in order of appearance.

That order puts December's housing starts and building permits at the front of the line. The numbers were less than thrilling, though bear in mind they're December's numbers, when it looked relatively certain a shutdown was imminent. Psychology might have played a role.

Housing Starts and Building Permits Charts

Source: Thomson Reuters

We also got updates on home prices early in the week, from the Case-Shiller report as well as the FHFA. Not surprisingly, the growth rate did slow, but that may have been more a function of recent red-hot growth than a sign of fading demand.

Home Price Index Charts

Source: Thomson Reuters

Curiously, on Tuesday we learned the Conference Board's measure of consume confidence jumped from 121.7 to 131.4 in February, coming in well above expectations. It's an encouraging sign that, despite all the political bickering and the doomsday prophecies being touted about the market, the people who actually drive the economy (and stocks) aren't terribly worried.

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