Although it was a low volume week, the bulls clearly outnumbered the bears last week. The S&P 500 (SPX) (SPY) managed to close at a record high close on Friday after hitting a record intraday-high on Thursday. Well supported or not, the momentum continues to carry us higher.
The advent of a new month against the backdrop of an overbought market, however, is a potential opportunity for the bears to take control again. And, from a statistical perspective, that potential is there for September. We’ll take a look at the market’s potential stumbling blocks after dissecting last week’s and this week’s economic numbers.
We got a fairly big batch of economic information last week. We’ll stick with the highlights, beginning with Monday’s and Tuesday’s real estate data. On Monday we learned July’s new home sales fell from a pace of 422,000 to 412,000. The overall uptrend is still in place, however. On Tuesday the Case-Shiller Index showed home prices were 8.5% higher in June than they were a year earlier, and the FHFA says home prices grew 0.4% between May and June.
Although the media raised a small red flag about the slump in new home sales, the worry wasn’t merited. Looking at the whole real estate picture – last week’s data too - the real estate and construction picture still looks like it’s pointed in the right direction.
On Friday the media once again rattled investors’ cages by obsessing about the fact that consumer spending slumped 0.1% in July. It was the first dip in a long time, and since all big trends start as small ones, this one could be the beginning of trouble. But, that’s probably not going to be the case.
While consumers may have spent less in July, it’s not because they’re worried. The Conference Board’s consumer confidence measure reached a multi-year high of 92.4 for last month. The Michigan Sentiment Index also rose to a multi-month high of 82.5 in August, and both data sets are in strong uptrends.
And of course, we also got the second reading on second quarter’s GDP growth. Rather than the first guess of 4.0%, it was actually up by 4.2%. The third/final reading will come in mid/late September, but isn’t likely to change much from the second estimate.
Here’s the rest on the following Calendar: