Last week I wrote that there was so much on the calendar that it was impossible to choose a single theme. This week presents the opposite problem. In the wake of the big news, what will command attention? As I studied the data, I was struck by the confluence of record results. Put that together with record stock prices, and there is a natural question for the ever-skeptical punditry:

Is this as good as it gets?

Last Week Recap

In the last edition of WTWA I predicted a paradise for the punditry, gorging on a feast of data, Fed news, and policy proposals. That was a pretty easy call, and it did give us a chance to think about a range of key issues. I noted that a lot of news does not necessarily translate into volatility – and so it was. The market shrugged off the appointment of a new Fed Chair, Mueller’s indictments, and the GOP tax proposal. The economic data was mixed, and so was the market.

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. She notes the gain of 0.26% on the week, after Friday’s strength. Once again, it was a week of very low volatility; the intra-week range was less than 1%. Historically 1% moves are commonplace — each day.

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.

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 has been mostly positive, as summarized by New Deal Democrat’s list of long, short, and coincident indicators.

The Good

  • Lumber futures are stronger. Mark Hulbert navigates the complexities of trends and tariffs, concluding that this is a useful leading indicator for stocks.
  • Auto sales continued a “hot streak” (WSJ). The SAAR is now 18.1 million, with good prospects for the end of 2017.
  • Jerome Powell’s nomination as Fed Chair was quietly accepted by markets. With New York Fed President William Dudley reportedly about to announce his retirement, there are four more openings to fill.
  • Consumer confidence measured by the Conference Board is at the highest level in 17 years. Jill Mislinski’s analysis is comprehensive and the summary chart is great. Bespoke’s charts show that future confidence is lower than the present.

  • Earnings reports remained strong (FactSet) with earning beat rates 4.8% higher than average and revenue beat rates 1.2% higher. Bespoke has a nice summary of the biggest winners and losers.
  • Initial jobless claims hit the lowest level since 1973 (four-week moving average). Once again, let us look at Jill Mislinski’s informative chart. It helpfully shows the long-term view, but with a focus on the last year.

    • The Bad

  • ISM manufacturing is cooling from a hot September reports Bespoke. The decline to 58.7 from last month’s thirteen-year high is “modest” they suggest. They are also encouraged by the comments:

  • The rally is somewhat narrow. Lara Crigger (ETF.com) describes the presence of the “Four Horseman” in many ETFs. The heavy weighting of these stocks can generate an exaggerated impression of overall strength.

  • The employment news. While the report was mixed, the headline number missed expectations, so I’ll score this as “bad.”

    • PBS highlights the lower labor force participation and lack of wage growth, up only 2.4% over the last year.
    • The miss in the headline number was much smaller when considering upward revisions to the prior months.
    • ADP private job growth was solid. (James Picerno)

    • New Deal Democrat summarizes the data and reaches the following conclusion:

      This was an excellent report in terms of labor utilization, decent in terms of jobs growth, and poor in terms of wages.

      The big declines in unemployment, underemployment, involuntary part time employment, and persons who want a job now but haven’t looked have nudged us very close to what has been “full employment” in the past two expansions.  We may be as little as 1.5 million jobs away.

    • The Neutral

    This week had some news worth mentioning, but without a real market effect.

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