Weighing The Week Ahead: Ready For Your Holiday Shopping?

We have a normal week for news with the emphasis on inflation data and business optimism. In recent weeks data has had little bearing on stock price movement. In fact, the opposite has been the case. Whatever happens with stock and bond prices is selectively used to spin the data interpretation.

There are many dire warnings of recession and a complete market collapse. They are hard for most to ignore, especially since these are the grist for nightly news summaries.

I am not worried about these outcomes. Asking myself the best topic to write about this week, I decided a focus on my personal analysis should be more prominent than usual. Rather than relying only on my opinion, and those of some other savvy experts, I will look in more depth at the week’s trading. When I finish, we will be asking: Are you ready for your holiday shopping?

If we get a little bounce in stocks, you will see the punditry, always followers, join in asking this question.

This week’s Investing section has some ideas for your list.

Last Week Recap

In my last edition of WTWA I took note of the big week for news and data. With nothing definitive yet on the G20 meetings, I laid out three possible scenarios. The “middle” choice was “…a ‘cease fire’ on further moves and a general outline on meetings and next steps. Both sides would declare this to be a triumph. Once again, this could still be the announcement given what we know now. In the worst case, I estimate a market decline of about 2%. The first 1% merely unwinds Friday afternoon, so don’t be bamboozled by those spinning the “meaning” of any announcement.”

This was a good call for about a day. My expectation was that this would clear the way for a return to fundamentals. Didn’t happen. A closer look at the reasons will help with planning for the week ahead.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. This week I am featuring Jill Mislinski. She includes a lot of relevant information in a single picture – worth more than a thousand words. Read the full post for more great charts and background analysis

The market declined 4.6% in the four-day week, almost completely wiping out the prior week’s 4.8% gain. The trading range was 6.7% after Monday’s gap opening. The volatility remains very high, which you can see in our Indicator Snapshot section below.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

New Deal Democrat’s high frequency indicators are an important part of our regular research. This week reflects further softening in all time frames. The long leading indicators remain negative.

When relevant, I include expectations (E) and the prior reading (P).

The Good

  • The ISM manufacturing index registered 59.3. E 57.2 P 57.7. (Bespoke).

  • Low inflation gives the Fed room to pause. (Ed Yardeni). Tim Duy sees economic strength and expects the Fed to see the same. He has a nice comment on the yield curve inversion issue.
  • ISM services recorded 60.7. E 59 P 60.3. The ISM reports that historically this strength has corresponded to economic growth of 4.3%. The full report also includes survey elements and some typical comments.
  • OPEC agreed on a reasonable output cut of 1.2m barrels/day. This provides some support for US oil businesses and is not a large effect on consumers. Saudi Arabia joined the agreement in spite of Trump tweets in opposition. (The FT).
  • University of Michigan sentiment (Dec preliminary) was 97.5. E 96.8 P 97.5.
    (Jill Mislinski)

The Bad

  • Construction spending declined 0.1%. E 0.3% P -0.1%. Steven Hansen (Econintersect) looks beyond the headlines to help in identifying the down-tick in the trend. He uses moving averages to deal with this noisy series and frequent revisions.

  • Auto sales for November were 4.01 M. P 4.27 M. The “Ford Truck Indicator” even declined a little. Bespoke notes this as a good read on business and construction.

  • Employment data weakened slightly. I am scoring this as “bad” because of the small miss. It was within the error range on all results and viewed as a “Goldilocks” number by some observers.

    • Initial jobless claims increased to 231K. E 225K P 235K.
    • ADP private employment increased 179K. E 192K P225K.
    • Payroll employment grew 155K. 189K E 237K (revised down from 250K) prior.
    • Average hours worked down-ticked to 34.4. E and P 34.5

The Ugly

Scammers preying on the victims of the California wildfires. This SEC warning was highlighted by Econintersect, one of our valued regular sources. Editor John Lounsbury dishes up an eclectic blend of economic research, opinion, and important items from official sources. Many of these are easy to miss without John’s helpful pointers.

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