The week’s key economic releases were bullish, but there were a few notable negative surprises with the weaker-than-expected Markit manufacturing and services PMI’s being the most worrisome for Wall Street. Meanwhile, the drop in the number of jobless claims, strong personal spending, personal income data, and the bullish Richmond Manufacturing Index fueled the rally in yields.
The short-term technical picture remains mixed in the wake of this week’s large swings, but the bullish long-term trends are still intact with only the Dow and small-caps showing notable technical weakness. The S&P 500 and the Nasdaq are still trading above their 50-day moving averages, and the large-cap benchmarks are all holding up above their 200-day moving averages. Small-caps remained under pressure for the third straight week, and on Friday, the Russell 2000 plunged below both of its moving averages while hitting a six-week low. The Volatility Index (VIX) exploded higher on Friday, getting close to the 30 level while hitting an over two-month high, which points to more wild swings in stocks in the coming days
Investors are in for another active week of economic releases focusing on the labor market and the consumer economy. Pending home sales will be out on Monday, the CB consumer confidence number will be released on Tuesday, the ADP payrolls number and the ISM manufacturing PMI are scheduled for Wednesday, OPEC’s meeting will highlight Thursday’s session, and the week will end with the ISM services PMI and the government jobs report. The first Black Friday sales reports could also have a major impact on stocks, especially in the retail sector, setting the tone for the expected seasonal holiday rally.