Last week’s economic data did little to act as a headwind for the rally in US equities––a rally that seems to defy gravity. Small Business Optimism (NFIB) logged a monthly reading of 105.3 for August, matching the 12-year high set in January of this year. The JOLTS Report, though backward looking, for July confirmed a tight job market coming in at 6.170M. On a somewhat modestly disappointing note, the PPI-FD reading for August underwhelmed. Bloomberg consensus was calling for 0.3%. The actual was 0.2%. Additionally, less the volatile food and energy, the reading was a scant 0.1%. Clearly, inflation at the producer level remains mysteriously absent from the economic expansion. That said, consumers did see an uptick in prices. The Consumer Price Index for the month reflected a rise to 0.4%, versus expectations that were calling for 0.3%. The CPI Y/Y change was 1.9% versus July 1.7%. Not at all surprising, given the early impact hurricane season, retail sales for August were weak coming in at -0.2%. The Empire State Mfg. Survey surprised to the upside again coming in at 24.4 for September and well above consensus range. Remember last month’s reading was a much stronger than expected 25.2. Easily the biggest disappointment of the week on the economic calendar came in the form of Industrial Production. For August consensus was calling for 0.1%. It was -0.9%. The overall tempo and tone of last week’s economic calendar remains constructive, as has been the case for much of the last several months. However, it is not compelling enough, in my humble opinion, to warrant a move by the FOMC this week particularly in light of the focus on balance sheet reduction.
US equities remain in a confirmed uptrend, though range bound, heading into this week.
The landscape remains remarkably volatility free with sector leadership likely to shift to the financial sector with Q3 earnings season on tap in coming weeks. That leadership in earnings is likely to be underscored by solid guidance. Recent economic data clearly provides for a constructive outlook. In my interview with Fred Katayama last week for Reuters Insider, I suggested that Apple is “affordable” given its valuation, earnings and prospects for additional consumer adoption in the coming months heading into holiday shopping season. I remain constructive and as I suggested, buying on the dips makes most sense. In the last nine trading days Apple has only logged days of gains.