The S&P 500 came within a whisker of setting a new all-time high on Friday. In the end, it had to settle, along with the Nasdaq, with only establishing a new record closing high. That was quite the consolation prize nonetheless for market bulls, who have been riding a V-shaped recovery effort for all its worth -- and it has been worth a lot.
The S&P 500 is now up 25.0% from its December low, whereas, the Nasdaq Composite is up 31.6%!
That stunning reversal has been a byproduct of improved sentiment (to put it mildly) that has been forged on the back of the Federal Reserve's dovish-minded pivot, abiding hope that the U.S. and China will soon work out a trade deal, and a renewed sense of confidence that a recession won't hit the U.S. economy soon.
Is the market overextended? It feels that way and looks that way, but like Sinatra, the stock market is doing things its way, holding fast to the trading adage that the trend is your friend.
Markets can stay overbought for extended periods just like they can stay oversold for extended periods.
Might the market be due for a pullback? Sure. It hasn't been rocked by a news catalyst, however, to spark a concerted pullback. There has been a dip here and there since the new year began, but that's it.
Every dip has been meet with buying interest, either due to the renewed confidence in the market outlook or to the nagging fear of missing out on further gains that keep coming in spite of the market outlook, which isn't considered to be as hunky-dory in some circles as the price action has suggested.
In any event, the stock market is just doing its thing right now and that thing has a bullish bias.
It might not look that way this morning based on the futures market, which isn't doing a whole lot. Then again, considering how far the market has run, it says something about the bullish bias that the market isn't doing a whole lot to unwind prior gains.
The futures for the S&P 500, Nasdaq 100, and Dow Jones Industrial Average are all little changed and are trading only slightly below fair value. That places the cash market on course for a slightly lower open.
There isn't going to be a shortage of news this week. In fact, there will be news overload -- and that doesn't even account for all of the earnings reports, like the ones from Apple (AAPL) and Alphabet (GOOG), that are going to be heard.
There will be trade negotiations in China; a meeting between President Trump and Speaker Pelosi to discuss an infrastructure plan; an FOMC meeting; a hearing on Medicare for All; and loads of economic data that features the April employment report on Friday.
This morning's economic data featured personal income and spending, as well as PCE price, data. There was some catching up to do, so to speak, as personal spending and PCE price data for February, which was delayed due to the partial government shutdown, was released in conjunction with the March data.
Briefly, personal spending increased 0.1% in February while the PCE Price Index and core PCE Price Index, which excludes food and energy, both rose just 0.1%.
For March, personal income increased 0.1% (Briefing.com consensus +0.4%), while personal spending surged 0.9% (Briefing.com consensus +0.8%). The PCE Price Index increased 0.2% while the core PCE Price Index was flat (Briefing.com consensus +0.1%).
The key takeaway from the report is that this data was imputed in the first quarter GDP report, so it shouldn't be too surprising. Ultimately, it helps advance the narrative that the U.S. economy seems to be benefiting still from solid consumer spending activity and muted inflation pressures.
With the March data in full bloom, the PCE Price Index, which is the Fed's preferred inflation gauge, was up 1.5% yr/yr in March, versus 1.3% in February. The core PCE Price Index was up 1.6% yr/yr in March, versus 1.7% in February.
(Correction: The original version has been corrected to show personal income up 0.1% in March. The original version indicated it was up 0.4%, which was the Briefing.com consensus estimate).