Market Exits Memorial Day Weekend Near Record High With Econ Data Incoming

Coming back from the holiday weekend, the market finds itself near record highs as the S&P 500 Index (SPX) rides a seven-day win streak.

That “win” on Friday was by the skin of its teeth, however, as the SPX barely rose in low-volume pre-Memorial Day trading. Asian stocks rallied earlier Tuesday, but European stocks fell and oil prices remain under pressure. Stock futures ticked lower in pre-market trading. Overall, it was a very quiet Memorial Day weekend and Tuesday looks like a slow news day, but there’s a potpourri of economic numbers up ahead.

Before getting to the host of data, it’s important to chat a little about market psychology. There’s lots of talk about how and why stocks should be going down and volatility should be going higher, but none of that happens. Retail traders would be wise to pay attention to the market and trade what’s there, not what they want to see.

This holiday-shortened week is so packed with data it’s hard to know where to start. Chronologically, it begins with today’s Personal Income and Spending data for April, along with the Personal Consumption Expenditures (PCE) price index. As always, this might be worth watching because the Fed keeps a close eye on these numbers. Inflation had been nearing the Fed’s target earlier this year, but since then hasn’t kept up.  Personal income rose 0.4% in April, matching expectations.

Another number worth watching today is May consumer confidence, a measure that also had been steadily rising until very recently. After flying high in March, the April number came down and the May number is expected to be a bit lower still, according to Briefing.com. There’s also some housing data, as the Case-Shiller 20-City Index is due.

Auto and truck sales, along with Chicago PMI and construction spending all bow a little later this week, but it all leads up to the biggie: Non-farm payrolls for May this Friday. Last month’s report was in the Goldilocks zone, with 211,000 new jobs sounding not too hot or too cold and reinforcing thoughts that the Fed would be ready to hike rates in June. This time around, Wall Street analysts’ consensus is for jobs growth of 185,000, according to Briefing.com, which wouldn’t be likely to change peoples’ minds much about the current state of the economy or the Fed’s likely next step.

Beyond data, the political buzz continues in the background. The president was overseas all week, which seemed to give the market a little breathing room after it toppled on political controversy the week before. With the president and all his men back in town, we’ll see if politics again become front and center. One thing to watch is whether former FBI Director James Comey gets a chance to testify to Congress, because that’s likely to be a big event for the market when it happens.

The Fed also remains in focus as its June 13-14 meeting draws near. Dallas Fed President Robert Kaplan said Tuesday that he anticipates two more interest rate hikes this year, according to media reports. A hike by next month is basically baked into the market, futures prices indicate, with chances at around 84%.

Debt Collecting

Here’s something that could help lift the post-Memorial Day fog: The U.S. is approaching its debt ceiling and may only be able to borrow for a little longer if Congress doesn’t act. The White House said last week that tax receipts are coming in slower than anticipated, the Washington Post reported last week, and the administration is urging Congress to raise the debt ceiling before legislators leave for the summer. If this all sounds like a movie you’ve seen before, it is. The country went through this a bunch of times during the Obama administration, and at times the market slumped when it appeared Congress might not act. Though the political dynamics are different now, it’s certainly something to keep an eye on, because delays getting this done might start to make investors nervous.

Retailers Stepping Up

We talked last week about the challenge retailers face in keeping customers amid the ecommerce onslaught. But a number of retailers reported strong results at the end of earnings season, which came as a relief to those who worried after department stores stumbled. One of the big stories last week was Best Buy Co Inc BBY. While BBY faces online competition, the company’s results indicate that many consumers still prefer to drive to the store for guidance buying their electronic games and phones. Additionally, BBY is rolling out an in-home advisers program to help customers equip their homes with technology. Maybe that’s the kind of idea that could help keep big retailers stay relevant as they compete with Amazon.com, Inc. AMZN.

Mixed Signals

Two factors to watch outside of the stock market continue to be Treasuries and oil. The Treasury market rallied along with stocks last week, and 10-year yields fell back toward recent lows. Oil keeps bouncing around near the $50 a barrel level, not getting much leverage so far from OPEC’s agreement to extend production cuts, and Treasury yields seem to signal that for some people, at any rate, there’s still doubt about the strength of this economy. Both bond yields and oil slipped as the new week began, and the dollar fell against the euro and yen. Weak oil could drag the energy sector today, but in the longer term it might be helpful to other sectors by reducing shipping costs. It probably won’t start to weigh on the market overall unless it drops below $45.