Weekly Market Outlook – Friday’s Strong Finish Saved The Week, But The Rally Got Dented

Stocks started and ended last week on a bullish note, leading to a net gain for the five-day stretch. But, what happened in between exposed the market's vulnerability. We reached new multi-week lows on Friday before the big bounceback, snapping some technical support in the process. And the bullish volume never quite outpaced the bullish volume -- even on Friday when the indices mustered gains.

Translation: Confidence in the rally since last March is being shaken. It remains to be seen if it's shaken enough to spark a more serious correction, but that's a distinct possibility here. We'll look at the matter in some detail below - as always. First though, let's recap last week's big economic reports and look at what's in the cards for this week.

Economic Data Analysis

There's no reason not to start with last week's biggest report: February's jobs numbers. The Department of Labor says we added 379,000 new payrolls, which was just enough to pull the unemployment rate down from 6.3% to 6.2%. Both were better results than expected.

Payroll Growth and Unemployment Rate Charts

Source: Department of Labor, TradeStation

There weren't any gimmicks supporting employment progress either. Unemployment numbers fell, and the size of the labor force grew, too. More people are just working, and they're working a few more hours for a little more pay. None of the metrics were great, but all of them showed a slight improvement.

There is one red flag, however. The ADP Employment Change report - which more or less moves in tandem with the DOL's payroll growth figure - didn't do so this time around. ADP says there were only 117,000 newly created positions for last month, falling well short of the expected 180,000. It'll be interesting to see if the government's figure is revised a month from now.

The only other data set of interest from last week is the Institute of Supply Management's manufacturing and service index readings. The former improved to a multi-year high level of 60.8, jibing with job growth and suggesting the economy is picking up steam. The latter fell from 58.6 to 55.3, but that's still above the 50 level that separates growth from contraction.

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