The past week has seen the S&P 500 hover right below but not at record highs. The lack of new highs in price appears to have left individual investors apprehensive as bullish sentiment in the AAII survey pulled back 9.2 percentage points to 38.8%.  That was the biggest one-week drop since a 16.5 percentage point decline in the week of September 16th, though back then, bullish sentiment sat much lower at 22.4%.  At the current level, bullish sentiment is still within one percentage point of the historical average.

While bullish sentiment saw a sharp reversal lower, bearish sentiment rose modestly to 27.2%.  That is the highest level since the end of October and that remains roughly 3 percentage points below the historical average.

Those inverse moves resulted in the bull-bear spread falling to 11.6. While lower, that still indicates overall sentiment favors optimists.

A greater share of the losses to bullish sentiment shifted to the neutral camp with around a third of respondents reporting as such.  That is the highest level since the first week of October.  That reading is a few percentage points above the historical average meaning that like bullish and bearish sentiment, current survey readings do not indicate sentiment is elevated or depressed to any sort of notable extent. Click here to view Bespoke’s premium membership options.

There were two regional Fed bank manufacturing survey results for the month of November released this morning.  The first and stronger of these was out of the Philly Fed. Like the neighboring Empire Fed reading out earlier this week, the Philadelphia Fed’s survey showed an acceleration in activity this month that exceeded expectations. The index for General Business Conditions rose 15.2 points to 39.0 versus a more modest expected increase to only 24. That brings the index from a 79th percentile reading last month to a 96th percentile reading which is the strongest since April’s near-record level.

Not only was there a big increase in the headline number, but many of the other categories also saw significant increases this month including new orders, unfilled orders, and prices received which all saw month over month gains that rank in the roughly top 5% of each index’s respective history. Overall, the report showed continued growth in the region’s manufacturing economy with almost every category accelerating MoM in November.

Demand saw massive improvement this month as the index for New Orders leaped higher by 16.6 points to 47.4. That leaves the index at the second strongest level on record behind March 1973. Shipments also rose but the increase was far more modest relative to gains for demand. As a result, Unfilled Orders are also surging.  That index came in at the fourth-highest level to date with the only higher readings occurring in May of this year and January and March of 1973.

It isn’t a new story, but one headwind in spite of—or perhaps even partially because of—that strong demand is supply chain issues.  Higher readings in the Delivery Times index imply that products take longer to reach their destination. As with other reports, this index has been coming in at unprecedentedly high levels for several months now, but the Philly Fed differs in that this summer saw a big reversal lower. The increase this fall has now given up most of those improvements. Additionally, expectations are fairly optimistic with two months of negative readings in a row.

One other impressive aspect of the surge in demand is it comes as prices were hiked at a historic rate.  The Prices Received index rose to 62.9 which is the third-highest reading on record. The only months with higher readings were February and June 1974.  Prices Paid also rose month over month, but that index came up short of a new high. Click here to view Bespoke’s premium membership options.

Jobless claims were slightly weaker in the most recent data released this morning.  Expectations were calling for a drop to 260K, but instead claims only fell to 268K from last week’s 2K upwardly revised reading of 269K.  Given that revision, claims have now fallen for seven weeks in a row with new lows for the pandemic. Initial claims are also now only 12K above the pre-pandemic reading of 256K from March 13, 2020; the last week before claims began to print in the millions.

On a non-seasonally adjusted basis, that pre-pandemic low was finally taken out this week.  Unadjusted claims totaled 238.9K from 257K last week.  That is the lowest level since the first week of March 2020 when claims were a hair below 200K. With the program’s expiration now even further in the rearview, PUA claims continue to have a minimal impact of only 1,390.

From a seasonal perspective, 2021—particularly this fall—has been an interesting year.  For starters, claims have more or less returned to historically normal levels even when factoring in auxiliary programs. Furthermore, from Labor Day through the end of the year has historically marked a period of the year that claims have had a tendency to rise, but this year the opposite has been the case. In the context of that bucked seasonal trend, the current week of the year (46th) actually has a seasonal tailwind with claims rising week over week only 16.67% of the time since 1967.  In other words, this week’s drop could be expected but the new low it resulted in is thanks to seasonally unusual declines in weeks leading up to now.

Lagged one week to initial claims, continuing claims were the better part of the claims release.  Continuing claims fell to 2.08 million versus expectations of a decline to 2.12 million from last week’s reading of 2.16 million.  As with initial claims, that resulted in the strongest level for claims since March of last year when the reading sat below 2 million.

Using the non-seasonally adjusted data and including all other programs adds one more week of lag to the data making the most recent reading through the last week of October. The end of last month saw an uptick in claims across programs with the biggest contributor being PUA claims which rose by over half a million. At 791.1K, PUA claims were at the highest reading since the week of September 10th; right after pandemic programs expired.

While an uptick in PUA claims sounds puzzling given the program is expired nationally, delving deeper into the data shows the US uptick is all thanks to one state: California.  As shown below, California has continuously made up for a large share of national PUA continuing claims since the start of the program. While the state has seen a substantial drop like the rest of the country this fall, this week’s rise leads California’s claims counts from this program to be a multiple larger than the 52 other states and territories combined.  Click here to view Bespoke’s premium membership options.