After a strong report on manufacturing in the New York area earlier this week, the Philly Fed Manufacturing report one-upped its neighbor with a blowout report.  While economists were expecting a modest decline in the headline reading from 17.0 to 11.0, the actual reading came in at 36.7, more than triple expectations!  This was the strongest reading for the headline index since February 2017, but before that, you have to go all the way back to December 1993 to find a stronger reading.  Not only that, but relative to expectations, this month’s report was the biggest beat on record (going back to 1998).

Not only was this month’s report strong, but it also followed the January report which also increased 14.6 points on a m/m basis.  Combining the back to back increases together, it was the strongest two-month increase in the Philly Fed headline index since September 1995 and the third strongest two-month gain in the history of the report going back to 1980!

Breadth in this month’s report was also very positive as just two components — Prices Paid and Number of Employees — declined.  Meanwhile, a number of components saw double-digit increases including New Orders, Unfilled Orders, and Inventories.  When it comes to the Philly Fed Manufacturing report, they don’t get much stronger than this!  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

With the major indices little changed over the past week, sentiment readings from AAII‘s weekly investor survey likewise moved only slightly.  The percentage of respondents reporting as bullish remains above 40% but pulled back slightly from 41.33% last week.  The 0.73 percentage point drop was the smallest move in bullish sentiment (either positive or negative) since November 28th of last year when bullish sentiment fell only 0.6 percentage points.

With bullish sentiment declining, respondents reporting as bearish picked up the difference rising 2.3 percentage points to 28.7%.  Although up versus last week, bearish sentiment remains fairly subdued at 1.63 percentage points below the past year’s average of 30.33% and around the low end of the past several years’ range.

Neutral sentiment was also little changed, dropping 1.47 percentage points to 30.8%.  Similar to bearish sentiment, neutral sentiment continues to come in at the low end of its range as it has averaged readings of 35.9% over the past year. This was the sixth week in a row that neutral sentiment has come in below its 52-week average; the longest such streak since a 15-week long streak ending in January of last year. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Initial jobless claims totaled 210K this week, matching expectations but rising slightly from an upwardly revised 206K last week. Despite the increase, claims remain low no matter how you measure it.

The past few weeks have seen claims come in at some of their strongest levels since the cycle low of 193K that was put in place back in April.  Without a continued move to the downside though, that April low is still firmly in place. That means it has now been 44 weeks without a new cycle low in seasonally adjusted jobless claims.  Looking back since the end of the Financial Crisis, that ties another 44-week long streak that came to an end in July of 2014.  Given claims remain at healthy levels just off of those cycle lows, this seems to point more towards the indicator having plateaued rather than deteriorating.

Even though claims rose this week, a higher reading of 223K rolled off of the four-week moving average which led the average to drop 3.25K. That leaves the four-week average at 209K which is the lowest reading since mid-April when it reached 206K.  That was also only one week after the moving average put in its cycle low of 201.5K

On a non-seasonally adjusted basis, jobless claims continued to decline as is seasonally normal for this time of year, falling to 208.3K. That is 2.4K lower than the comparable week last year and the lowest reading for the current week of the year for all years of the current cycle.  Given this, it is also well over 100K below the average for the current week of the year since 2000.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

For more than a year now, Boeing (BA) has been plagued by the 737 MAX crisis which has weighed on shares of the plane manufacturer with it now currently down nearly 20% from when the initial groundings took place on March 10th of last year. Despite this, while underperforming the broader market due to the 737 issues, the stock is actually still up just over 5% since the start of 2019.

Even though BA has lagged, it is still the highest-priced of the 30 stocks in the price-weighted Dow Jones Industrial Average. Currently trading around $338.50, the only stocks in the index holding a candle to BA are Apple (AAPL) and UnitedHealth (UNH), which also trade north of $300 per share. That means these stocks have the highest weighting in the index and therefore have a much larger impact than other stocks on the Dow’s performance.

With BA’s issues, a number of people have pondered the what-ifs for the Dow had the company not had the issues with the 737.  Would we have already broken out the Dow 30K hats were it not for BA?  In the chart below, we show the actual performance of the DJIA and have overlaid the performance of an ‘alternate Dow’ showing its performance if BA had not been in the index since the start of 2019.  We used the start of 2019 instead of the actual date of the groundings as it is a little less arbitrary.  By our calculations, while we would be a bit closer, even if BA wasn’t in the index since the start of 2019, we wouldn’t quite be at Dow 30K yet.  As shown, our alternate Dow would be almost 1% or 266 points higher if Boeing was not included in the index since the start of 2019.

While BA has been a drag on the DJIA since last March, it also provided a big boost to the index in early 2018 before the 737 issues hit the stock.  In fact, at the start of March 2017, BA was up over 36% YTD and the spread between the Dow’s performance with and without BA was around 700 points in the other direction as it is now!

Another example of this dynamic in which high priced stocks have a greater impact on the index was observed on Tuesday when Apple’s (AAPL) stock fell after the company warned that Q1 revenues would be shy of prior guidance due to the coronavirus. The warnings sent shares down over 3% at its intraday lows, but the stock only finished down 1.83%. While there were equivalent or larger declines like Dow (DOW) or Walgreens Boots Alliance (WBA) in Tuesday’s session, AAPL’s declines by far weighed on the index more than any other stock.  Of the Dow’s 165.89 point decline, AAPL contributed 40.35 points.  Fortunately, UNH helped to mitigate some of those losses as it had a positive impact on the index of +22.79 points.  Start a two-week free trial to Bespoke Institutional to access our Closer, full list of interactive tools, and much more.