Time For Bulls To Be Skeptical – Weekly Market Outlook

After five weeks of bullishness that took stocks to record highs, it didn’t come as a complete surprise to see the market take a modest tumble last week.  All told, the S&P 500 (SPX) (SPY) slipped 1.9% over the course of last week, breaking back under a key line in the sand at 1850. 

Is this the long-awaited beginning of the end of the end of the bull market, or is it just another of many small setbacks within a major uptrend… or is it something in-between?  The odds are, this is something in-between, meaning we haven’t likely hit bottom yet, but we’re not expecting any major meltdown from here.

We can show you exactly what’s leading us to that expectation with our charts below, but first, let’s review last week’s and this week’s major economic numbers.  

Economic Calendar

While the economic calendar was pretty full last week, truth be told, not much of last week’s data was all that important.  The only items of any real interest were February’s retail sales and producer inflation. 

As for consumer spending, retailers took in 0.3% more last month, with or without automobiles.  It’s an encouraging turnaround from January’s 0.3% slide in retail sales (-0.6% with cars being factored in).  Of course, January’s miserable weather was likely the bulk of the reason January’s consumer spending slumped. 

As for producer price inflation, one can’t help but wonder if we’re seeing flashes of deflation now.  Though prices haven’t been falling (on an annualized basis) since late-2009, for February, the producer price inflation index tumbled 0.1% (-0.2% on a core basis).  The annualized PPI rate is still a positive 0.9%, and the annualized consumer inflation rate stands at 1.58% as of January.  But, broadly speaking, pricing power has been waning for a while, pulling back from levels that were never particularly strong to begin with.