A holiday-interrupted week is loaded with important economic data. Since many market participants will skip Monday to stretch their weekend, the action will focus on Friday’s employment situation report. People will be asking:

Just how strong is the labor market?

Last Week Recap

The big economic news last week was the (slight) increase in volatility. Tuesday’s decline was attributed to the ACA repeal/replace delay and what it implied for the Trump agenda. That was forgotten by Wednesday. Thursday saw technology selling right at the opening. Art Cashin attributed the rotational decline to dueling programs. That had little carry over to Friday.

Our question from two weeks ago – a possible change in market leadership – got some real attention. Financial stocks did well in the wake of the bank stress test results.

The Story in One Chart

I always start my personal review of the week by looking at this great chart from Doug Short via Jill Mislinski. You can see the day-to-day shifts, as well as the small overall effect, less than 0.5% for the week.

Doug has a special knack for pulling together all the relevant information. His charts save more than a thousand words! Read the entire post for several more charts providing long-term perspective, including the size and frequency of drawdowns.

Note to Readers

Thanks to Investopedia for including us among the top 100 most influential advisors. Some of these lists only go for the huge firms. Others emphasize those with great fame, and fame alone. We have a nice team at NewArc, but we are all busy and wear many hats. I am delighted to have the chance to write as much as I do, since we emphasize communication and accessibility. For me it is all after-hours. Congratulations to Josh Brown for his well-deserved #1 ranking and Michael Kitces at #2.

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. The economic news last week was good. 

The Good

  • Chicago PMI recorded a three-year high of 65.7 This is often a good hint about the national ISM direction. (ISM Chicago)
  • Consumer confidence was solid in both the Conference Board and Michigan versions. Doug Short’s great chart, updated by Jill Mislinski draws together many themes – economic strength, recessions, and overall trend as well as the recent result. Here is the Conference Board version. Read the full post to see several other interesting comparisons.

  • Q117 GDP revised higher to 1.4%. This is backward looking, with Q2 now over, but it is more encouraging as the base for the start of the quarter.
  • High frequency indicators remain mildly positive. New Deal Democrat does his valuable weekly update, separating leading, long-leading and coincident indicators. The current picture is mixed to positive.
  • Personal income rose 0.4%, a touch better than expectations. Spending was up only 0.1%, in line. Steven Hansen (GEI) reports on both, including this interesting table:

    • The Bad

  • Durable goods orders declined down 1.1% on the headline and down 0.1% ex-transportation.
  • Jobless claims increased to 244K.
  • Pending home sales unexpectedly declined 0.8% over the prior month and 1.7% year-over-year. Most sources attributed the decline to limited supply. (Investing.com)

    • The Ugly

    Illinois once again grabs the spotlight. With no action in Friday’s session, the state enters a third year without a budget. The longer it takes, the more difficult a solution becomes. As of today, a court ordered the completion of certain Medicaid payments, but that just shifts the problem. Bond agencies are poised to reduce state debt to junk status – a first for any state. The head of the Illinois House Speaker Michael Madigan is asking the agencies for more time.

    It is easy to blame “the politicians,” and that is what everyone is doing. It is a good illustration of what happens when two sides each represent a viewpoint with no ability to compromise. Each side’s constituents are supportive. No one is held accountable.

    Gil Weinreich’s recent commentary is still on target.

    The Week Ahead

    We would all like to know the direction of the market in advance. Good luck with that. Second best is planning what to look for and how to react.

    The Calendar

    It is a busy calendar, especially for a short week. Employment data, ISM manufacturing and services, and auto sales are all important.

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