Stocks were under pressure last week, as the S&P 500 fell by 2.16 percent to 2,743.07. That still left the benchmark index up 9.42 percent 2019-to-date, and just 6.40 percent below the all-time closing high hit last September. As explained in the previous Kickstart, some pullback or at least consolidation in the market would not be too surprising given the V-shaped surge off of the December lows and rising signs of complacency. In fact, the level of pessimism expressed by investors in February’s final AAII survey about the direction equities are heading during the next six months fell to its lowest level in over a year, and more than one standard deviation below the historical average.
Even after last week’s selloff, the updated AAII poll showed that short-term pessimism among individual investors rose slightly but still held below average for the 5th consecutive week. A larger number of respondents, though, did cite growing concerns about a deeper, prolonged bear market occurring within the next few years, which is interesting since last week also marked the 10-year anniversary of the S&P 500’s post-crisis low (666.79). For some perspective, investors at that time were not only dealing with a market that had already fallen in value by nearly 50 percent during the prior six months but also a constant influx of discouraging economic data, e.g. an unemployment rate over 8 percent and a string of monthly job reports that each showed around 700,000 lost payrolls. As scary as such headlines might have been at the time, any investors who were confident enough in the long-term resiliency of the U.S. stock market to overlook the negative news and step in while others were running for the exits capitalized on one of the best buying opportunities in history.
To recap a few of the things we learned about the economy last week, the positives included that new home sales rose, housing starts increased, real estate affordability improved, consumer credit demand picked up, services sector activity rebounded, productivity growth firmed, initial jobless claims slid, official measures of unemployment and underemployment hit cycle lows, and average hourly earnings growth climbed to the best reading in a decade. As for the negatives, the nation’s trade deficit surged, the 30-year mortgage rate rose for the first time in a month, home purchase applications decreased, single-family building authorizations fell, U.S. construction spending moderated, corporate layoff announcements spiked, small business job creation plunged, and nonfarm payrolls growth collapsed. This week the pace of economic data remains elevated with several important reports on manufacturing, housing, consumers, small business, employment, and inflation scheduled to be released, including a lot of data previously delayed due to the partial government shutdown.
**A more detailed snapshot of the U.S. economy can be found here.**
What To Watch:
- MBA Mortgage Applications 7:00 AM ET
- Durable Goods Orders 8:30 AM ET
- PPI-FD 8:30 AM ET
- Construction Spending 10:00 AM ET
- E-Commerce Retail Sales 10:00 AM ET
- EIA Petroleum Status Report 10:30 AM ET
- 30-Yr Bond Auction 1:00 PM ET
- Jobless Claims 8:30 AM ET
- Import and Export Prices 8:30 AM ET
- New Home Sales 10:00 AM ET
- EIA Natural Gas Report 10:30 AM ET
- Quadruple Witching
- Empire State Mfg Survey 8:30 AM ET
- Industrial Production 9:15 AM ET
- Consumer Sentiment 10:00 AM ET
- JOLTS 10:00 AM ET
- Baker-Hughes Rig Count 1:00 PM ET
Sources: Econoday, AAII, Twitter, FRBSL
Post author: Charles Couch