Tariff headlines have taken a front seat in the past couple of weeks leading stocks to see their worst declines of the year.  Not surprisingly, sentiment has begun to reflect price action.  One week after coming in at its highest level since October (around the time the S&P 500 hit its previous all-time high), bullish sentiment has fallen off of a cliff this week to 29.82% versus 43.12% last week.  From a historical perspective, this is not at any kind of extreme, but it did bring optimism to its lowest level of 2019 and by a pretty wide margin at that. Additionally, this was the largest drop in bullish sentiment since December 13th of last year when it fell 17.04% in a week. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Bears have overtaken the bulls this week as the bull-bear spread is now negative for the first time since January 17th.  Bearish sentiment spiked up to 39.3% from 23.19% last week.  While this was a massive spike higher, it is still well off of any sort of extreme and we actually saw higher readings late last year.  Investors Intelligence is echoing the AAII results as that survey showed the highest percentage of respondents since February (31.1%) expecting a correction. Granted, bearish sentiment in this survey remains muted as it actually fell to its lowest level since April of last year.

Tanking to 30.88%, it is hard to still say neutral sentiment is still elevated after peaking four weeks ago when it hit 46.31%.  This represents the sharpest four-week declines in neutral sentiment 1/23/16 when it fell 15.71 percentage points (from 51.31% to 29.77%). Currently, neutral sentiment is sitting less than a percentage point below its historical average.

Yesteday the Investment Company Institute (ICI) released weekly mutual fund flows for the week ending May 8th. Generally speaking, recent trends of huge outlfows from equity mutual funds and huge inflows to bond mutual funds have continued, with a few exceptions. Domestic large cap equities saw an inflow (their first in the past sixteen weeks), as did both emerging and developed market equity funds focused on international markets. High yield bond funds continued to see outflows, and flows into both global and domestic government bonds slowed. Muni bonds also continued to get huge flows, with one week flows in the 96th percentile of all periods. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

We’ve been highlighting the inverse patterns of the Health Care and Technology sectors for several weeks now, but in looking at their updated relative strength charts, it continues to amaze us how the two sectors couldn’t be more opposite.  Just when Health Care’s relative strength versus the S&P 500 peaked late last year, the Technology sector bottomed and started to outperform.  That trend continued nearly uninterrupted right into late April when Technology started to falter and Health Care outperformed.  Ever since Monday, though, we’ve started to see early signs of the trend reversing again as Tech has outperformed the last couple of days and Health Care has lagged.  While no market relationships last forever, the predominant pattern between the two now remains – Tech’s gain is Health Care’s pain.  Start a two-week free trial to Bespoke Institutional for our weekly Sector Snapshots update where we summarize the predominant technical and fundamental trends of major sectors.

It has been a pretty busy morning in terms of economic data with six releases already out.  The results: beats across the board.  Not a single US indicator today has come in worse than expectations/the prior period.  At 8:30, we got some housing data with both Housing Starts and Building Permits for the month of April. Each one were expecting an uptick, but the actual releases rose by even more than anticipated. In The Closer tonight, we’ll discuss some of the reasons that the headline was much stronger than the underlying details. The Philly Fed also released its Business Outlook Index at 8:30. After a reading of 8.5 in April, forecasts were calling for a moderate rise to 9.  Instead, it crushed estimates rising to 16.6 for the month of May.  Turning to some weekly releases, initial jobless claims and continuing claims both fell more than was anticipated while optimism, as seen through Bloomberg’s Consumer Comfort, rose modestly. Still on deck later today, we have two weekly bill auctions in addition to scheduled speeches from Minneapolis Fed President Kashkari and Fed Governor Brainard. Given Brainard is a voting FOMC member and Kashkari is an alternate voter, markets will monitor their words for hints of what might be to come in terms of monetary policy.

Institutional clients can stay up to date on today’s and the next week’s economic releases for the US and the rest of the globe with our Economic Monitors. Below is a snapshot from the US Economic Scorecard. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

It has been a pretty solid morning in economic data as every release so far has beaten estimates. That includes Initial Jobless Claims which came in at 212K this week versus expectations of 220K.  Not only was this below estimates, but the indicator has now come back down from its relatively elevated levels from the past three weeks in which we had seen two readings of 230K and another of 228K.  Additionally, this week marked the 70th consecutive week of the indicator sitting under 250K and the 219th week below 300K.

Four weeks ago, claims came in at its lowest print in a half-century for both the seasonally adjusted number and the four week moving average. This week that low of 193K in the SA number has rolled off of the moving average, leading the less volatile look at the data to tick up to 225K from 220.3K last week.  The moving average has risen for four straight weeks from its lowest level of the cycle, now sitting 23.5K above this recent low.

On a non-seasonally adjusted basis, the data still appears healthy as it dropped down to 187.7K from 204K last week.  That is the second lowest reading of 2019 (lowest was 183.8K for the final week of March) and it also sits well below the average for the current week of the year since 2000.  One trend we made note of last week was the increasing number of weeks with a YoY increase in the NSA number.  This week’s decline snapped a streak of three straight prints with a YoY increase.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.