Weekly Market Outlook – The Best And Worst Possible Kind Of Breakout

Despite last week’s bullish start, the buyers offered very little follow-through in the middle of the week. Too much political noise kept traders on the sidelines. That all changed on Friday though, and with very little prodding. Thanks to Friday’s 1.74% jump from the S&P 500, the index booked a gain of 3.5% for the week… one of the biggest weekly gain in years. The NASDAQ Composite reached a record high,

The $64,000 question is, can it last? It’s certainly not the ideal launch of a new breakout. But, this is also a market that’s made a habit of doing the unthinkable and doing the illogical.

We’ll look at all of it below. First though, let’s set the backdrop with last week’s and this week’s economic news.

Economic Data

A fairly busy week last week, ending with some rather amazing employment news for February. But, let’s look at the data in order of appearance.

The IDM Services report for last month got the party started on Monday, rolling in a little lower than the expected 59.9, but still plenty respectable at 59.5. You’ll recall the ISM Manufacturing Index from two weeks ago hit a multi-year high of 60.8. Together, the two ISM readings paint a pretty rosy picture.

ISM Manufacturing and Services Index Charts

Source: Thomson Reuters Eikon

It’s been a while since we needed to bother taking a look at it, but just for good measure do note the crude oil inventories continue to inch higher. They’re not rising enough to outright pull the rug out from underneath oil prices, but they’re certainly not helping. Meanwhile, natural gas in storage continues to slide, though that descent is slowing down.

Crude Oil, Natural Gas Inventory Charts

Source: Thomson Reuters Eikon

The big Kahuna, of course, was February’s job growth. Economists were looking for payroll growth of only 210,000, but we actually saw 313,000 new payrolls added for the month. That’s the most additions since mid-2016. It wasn’t enough to push the unemployment rate any lower than 4.1%, but that’s not unusual in that the nation is pretty much at its lowest plausible unemployment rate.