The economic calendar has several of the most important reports. The managerial rosters will be back at full strength, perhaps after an extra day or two off. Investment committees will consider implications from Q1 results. Pundits will try to explain what it all means. They will ask: have stock prices diverged from the fundamental outlook?

Last Week Recap

In my last edition of WTWA I asked whether a trade war could be avoided. This was the key question for the week, and progress was more rapid than most (including me) expected. While not resolved, the stimulus to negotiation and delay in full implementation is encouraging.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. I always start my personal review of the week by looking at a great chart. I especially like the version updated each week by Jill Mislinski. She includes a lot of valuable information in a single visual. The full post has even more charts and analysis, so check it out.

The loss this week included a trading range of about 4%. This is in line with recent volatility, but not all in one direction, as was the case in several weeks during Q1. I summarize actual and implied volatility each week in the Indicator Snapshot.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

Feel free to add items that I have missed. Please keep in mind that we are looking for current news, especially from the last week or so. WTWA is not about long-term concerns like debt. These are important, of course, but not our weekly subject unless there has been some major change.

The Good

  • Personal income just met expectations, but the gain of 0.4% is solid.
  • Initial jobless claims declined to 215K, much better than expectations of 230K and a new cycle low. It is the lowest week since January of 1973. I like Bespoke’s chart because it shows both a longer-term trend as well as a focus on recent results.
  • Q4 GDP revised higher to an annualized real rate of 2.9%, better than the last estimate of 2.5% and expectations for improvement.
  • Pending home sales increased 3.1%, beating expectations and bouncing back from the January results (revised even lower). The index is still down 4.1% year-over year. (Calculated Risk)
  • Bearish sentiment increased, a contrarian indicator. (Bespoke)
  • The Bad

  • Chicago PMI declined from 61.9 to 57.4, missing expectations for a slight increase. This is often an indication of the ISM index to be released on Monday.
  • Consumer confidence softened, although the market is not really treating the near-record levels as “bad.”

    • Conference Board 127.7 with 130 prior and forecast.
    • Michigan sentiment 101.4 with 102 preliminary and consensus. Despite missing expectations, this final reading is the highest since 2004 (Jill Mislinski).
  • Home prices still lag historical growth patterns and measured in real terms, remain 11.1% below the bubble peak. Calculated Risk explains the importance of this approach instead of the typical comparison of nominal prices.
  • The Ugly

    Managerial responses. I am struggling to find the right adjective for the delayed Facebook apology and policy changes. Large organizations are clumsy when there is no plan in place for a particular event. Facebook’s personal link to users contributed to setting the bar higher.

    Michigan State University continues to struggle with the consequences of an institutional failure to protect its students. Just when it seemed like the Nassar story had played out, we learn of new charges against former MSU dean William Strampel. These relate not only to his supervision of Nassar, but allegations about his own acts of sexual harassment and assault. How is management handling the problem? Among other steps they shelled out over $500,000 to a consulting firm to monitor social media, including the accounts of victims.

    We always hope that our institutions will improve on past mistakes, but this is not encouraging.

    The Calendar

    We have a big economic calendar, featuring the employment report for March, the ISM manufacturing and service indexes (both), and auto sales.

    There is a bit of FedSpeak. Congress is in recess. Despite this, the Washington circus may well dominate the news – once again. has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.

    Next Week’s Theme

    The economic calendar is more important than usual, with key reports on employment, the ISM surveys, and data on auto sales. While there have been some soft spots, the economic story has remained strong and corporate earnings growth has been excellent. Meanwhile, stocks have given up the gains from early in 2018.

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