The trading week certainly started on the wrong foot, but the bulls didn’t let things tumble out of control before stepping back in. The buyers were able to lock in a huge reversal on Thursday, and we got some pretty good follow-through on the effort with Friday’s trading. The indices aren’t back above the major lines in the sand we need them to be to be fully bullish, but we’re close, and pointed in the right direction.
We’ll weigh it all below, as we always do. Also as always though, let’s first paint the bigger picture with the broad brush strokes of economic information.
Economic Data
What a week! Though earnings season is winding down and the political rhetoric is ramping up again, there’s just as much economic information to sift through as there always is…maybe more.
The party started in earnest on Wednesday, when we rounded out the inflation picture by looking at October’s CPI data. The month to month rates rolled in as expected, up 0.3% overall and up 0.2% not counting food and energy. More telling though, on an annualized basis the overall inflation rate is 2.5%, and 2.1% on a core basis. For producers, the figures are 3.4% and 2.8%, respectively.
Producer, Consumer Inflation Charts
Source: Thomson Reuters
This is a Goldilocks report, in that inflation is neither too hot nor too cold. The Federal Reserve could be slightly less hawkish with rate-hike plans if it wanted too, though it doesn’t have to back off. It just needs to not get overly aggressive in 2019.
Also this past week we got last month’s October retail sales data. It too, was good, and better than expected.
The knee-jerk interpretations of the report aren’t quite as optimistic, with critics pointing out that spending growth for the past couple of months has been lower than the growth pace seen in the middle of the year. What’s being lost in the discussion is that the recent comparisons are up against tremendous spending growth in September and October. Either way, spending growth in excess of 4% is still quite healthy. Investors have been spoiled by amazing growth rates that can’t mathematically be sustained.
