Last week, two ancillary employment numbers were released. The Labor Market Conditions index, which is compiled by the Federal Reserve, rose 1 point, leading to its first positive reading since the first of the year. The JOLTs survey showed little change in either job openings or fires. But most importantly, there have been more openings then hires for the last few months, indicating jobs may be going unfilled for a variety of reasons. This should keep the job market strong and potentially add upward pressure on wages. The combined interpretation of both these indicators is that the jobs market is healthy, which is confirmed by the last two employment reports.     

On Friday, the Census Bureau released the latest retail sales figure, which was a disappointing 0% M/M gain. The number increased 2.3% Y/Y, which is at the low end of this recovery’s readings. However, control sales figures (which excludes auto sales, gasoline, food and drinking establishments and building supplies) were up a strong 3.5%. While the headline number was weak, it followed a strong .8% increase the previous month, so the latest reading could simply be a “cooling off” number from the strong growth the preceding month.

Economic Conclusion: there was insufficient information this week to draw any conclusion.

Market Analysis: earnings season has been better than expected. According to Zacks, with most of the S&P 500 companies reporting, revenues are down a paltry .2%; ex-energy, that number increases to 2.4%. This is a very important fact. With a high PE, the market needs growing revenues to eventually increase earnings, which would allow prices to rise commensurately with earnings growth. Factset.com reports similar numbers: according to their data, total revenue was also down slightly (-.2%) but 5 of 10 sectors are growing (health care, consumer staples, consumer discretionary, telecom and financials). That’s the good news.

The bad news focuses on technical indicators. According to Factset, the S&Ps forward PE is 17.1, which is higher than the 5 and 10-year average. And the percentage of S&P 500 and Nasdaq stocks above their respective 50 and 200 day moving averages is high. And despite a series of new highs, the markets are up only marginally, with the large caps up slightly and the small caps down slightly. This places the hoopla about new highs in a more conservative light.

In reality, little has actually changed. The market is expensive, needing rising revenues to grow. This earnings season, we did see a slight uptick in gross income, which has allowed the market to move slightly higher. But the rise is slight, which is in line with the moderate revenue increase.