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  • SPX hits new record highs, NDX tops 30% YTD
  • Tech reawakens, retail earnings crush estimates
  • This week: GDP, key housing numbers, and more earnings than you think

It took six months, almost to the day.

After teasing traders for more than a week, last Tuesday the S&P 500 (SPX) finally recouped the last few points of its February-March COVID collapse, poking its head above the former record high it set on February 19, and closing the week just a hair below 3,400:

Chart 1: S&P 500 (SPX), 7/24/20–8/21/20. S&P 500 (SPX) price chart. Completing the comeback.

Source: Power E*TRADE

The headline: Stocks mixed as S&P 500 hits new highs.

The fine print: The SPX hit another record high on Wednesday amid two days of blockbuster retail earnings (HD, WMT, TGT, LOW), but the minutes from the July 28-29 Fed meeting released that afternoon let some of the air out of the market balloon: FOMC members felt the pandemic would “weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term.”1 Thursday’s news that weekly jobless claims again jumped back above 1 million also appeared to temporarily weigh on the market, although the SPX rallied to close higher and followed through to the upside on Friday.

The number: 2—as in trillion (with a T) and dollars (with a D), as Apple (AAPL) became the first company with a $2 trillion market cap. The stock has rallied more than 29% since July 30.

The scorecard: US indexes were mixed last week, but the Nasdaq 100 (NDX) reclaimed the top spot for just the second time in the past six weeks—and check out that year-to-date return:

US stock index performance table for week ending 8/21/20. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE

Sector roundup: The strongest S&P 500 sectors last week were information technology (+3.5%), consumer discretionary (+2.4%), and communication services (+1.7%). The weakest sectors were energy (-6.1%), financials (-3.4%), and utilities (-1.7%).

Highlight reel: On Wednesday Momenta Pharmaceuticals soared (MNTA) 69% to $52.12 on news Johnson & Johnson (JNJ) was acquiring it, while Biomarin Pharmaceutical (BMRN) fell 35% to $76.71. Honorable mention: Ontrak (OTRK), which at last Thursday's high had jumped 74% in six days before pulling back.

Futures action: After an 8% trendline bounce that pushed prices back above $2,000/ounce, October gold (GCV0) pivoted lower last Wednesday, coming close to testing its trendline before ending the week at $1,938.30/ounce. A 3%-plus intraday sell-off on Friday dropped October WTI crude oil (CLV0) to a two-week low of $41.46 before the market bounced back to close at $42.34.

Last week's biggest futures up moves: September lumber (LBSU0) +14.4%, September wheat (ZWU0) +5.5%, September hard red wheat (KWU0) +4.8%. Last week's biggest futures down moves: September milk (DCU0) -4.3%, September VIX (VXU0) -10.4%, September Brazilian real (6LU0) -3.8%.

Coming this week

The second estimate of Q2 GDP is on tap this week, but after last week’s housing-market numbers blew past expectations, traders will be watching to see if this week’s batch can keep up the pace:

●Monday: Chicago Fed National Activity Index

●Tuesday: S&P Case-Shiller Home Price, FHFA House Price Index, Consumer Confidence, New Home Sales

●Wednesday: Mortgage Applications, Durable Goods Orders

●Thursday: GDP, Corporate Profits, Jobless Claims, Pending Home Sales

●Friday: Personal Income and Spending, PCE Price Index, Goods Trade Balance, Wholesale Inventories, Michigan Consumer Sentiment

A surprisingly busy earnings week has a bit of everything, but especially more retail and tech:

Monday: 360 Finance (QFIN), Palo Alto Networks (PANW)

Tuesday: Autodesk (ADSK), Best Buy (BBY), Toll Brothers (TOL), HEICO (HEI), Hormel Foods (HRL), J.M. Smucker (SJM), Pure Storage (PSTG), Urban Outfitters (URBN), Intuit (INTU), Nordstrom (JWN), (CRM), Medtronic (MDT)

Wednesday: Five Below (FIVE), Tiffany & Co (TIF), Dick's Sporting Goods (DKS), Williams-Sonoma (WSM), NetApp (NTAP)

Thursday: Burlington Stores (BURL), Ulta Beauty (ULTA), Ollie's Bargain Outlet (OLLI), Smith & Wesson (SWBI), Dollar General (DG), Dell Technologies (DELL), Dollar Tree (DLTR), Gap (GPS), Marvell Technology (MRVL), HP (HPQ), Workday (WDAY), VMware (VMW)

Friday: Big Lots (BIG), JinkoSolar Holding Ltd (JKS)

Go to the E*TRADE market calendar (login required) for an up-to-date earnings schedule and a complete list of splits, dividends, IPOs, and economic reports. The Active Trader Commentary also lists earnings announcements, IPOs and economic report times each morning.

Life after new highs

Traders disappointed by the broad market’s tepid performance in the first couple of days after last week’s push to new SPX all-time highs—where were the fireworks?—may want to be patient, since it reflected a pattern that’s played out several times in recent years.

While on a longer-term basis (past 60 years) the SPX has tended to exhibit more bullish “oomph” than average in the immediate aftermath of a new high like the one it made last week,2 over the past decade it’s tended to stumble a bit after such moves:

1. From 1960–July 2010 (97 similar highs): The SPX gained much more, on average, in the first five days after hitting a new high like last week’s than it typically did in a five-day period (0.62% vs. 0.14%, respectively).

2. From Aug. 2010–present (23 similar highs): The SPX’s average five-day return after hitting a new high like last week’s was -0.06%, while its average return for all other five-day periods was 0.24%. After 20 trading days (one month), though, the SPX was higher 17 out of 23 times with an average gain of 0.9%.

So, while the imminent arrival of September—historically, the weakest month of the year for US stocks—may introduce another wrinkle into this scenario, the more recent tendency for short-term weakness after new highs doesn’t necessarily suggest the market has put in a significant top, even though that’s always a possibility.


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1 Minutes of the Federal Open Market Committee. 8/19/20.

2 Based on S&P 500 (SPX) daily prices from January 1960–August 21, 2020. “New highs like last week’s” refers to a 17-trading-day rally in which the SPX: 1) rallied more than 5% (close-to-close), and 2) the high on the 17th day represented the first time the index made a six-month (or longer) high after trading below that threshold for at least six months. Supporting document available upon request.

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