Bulls, bears square off

05/24/21
  • Tech rebounds despite Fed “taper talk,” soft housing data
  • Energy stocks cool amid oil volatility, gold continues to shine
  • This week: More housing data and retail earnings, updated GDP

With a net gain or loss for May hanging in the balance, stocks head into the final full week of the month trying to break a two–week bull–bear stalemate.

For the second week in a row, the S&P 500 (SPX) started off the week with a sharp pullback, and once again the recovery—highlighted by Wednesday’s tech-fueled intraday reversal—wasn’t enough to nudge the index into the plus column for the week, as Friday’s early rally ran out of steam:

Chart 1: S&P 500 (SPX), 3/17/21–5/21/21. S&P 500 (SPX) price chart. Another choppy week.

Source: Power E*TRADE


The headline: Taper talk fails to derail market.

The fine print: Wednesday’s FOMC minutes release showed there was some debate among members about the threat posed by inflation and whether to taper the monthly asset purchases that have been a linchpin of the Fed’s stimulus efforts.1 The stock market didn’t appear to be fazed, though—perhaps because there was “debate” rather than unanimity, and the fact that the meeting took place before the disappointing May 7 jobs report, which may have at least temporarily squelched any inclinations the Fed may have had to take its foot off the gas.

The numbers: 1.57 million, the number of housing starts in April—far below the 1.71 million estimate. Existing home sales also came in lighter than expected (5.85 vs. 6.09 million).

The move: Speaking of the housing market, July lumber futures (LBSN1) traded limit up and limit down in a wild trading session last Wednesday—a $6,930 move, per contract, above and below Tuesday’s close. The market, which had retreated 28% over the previous eight trading days, rallied 9.5% on Thursday–Friday, trading limit up on both days.

The scorecard: The Nasdaq 100 (NDX) gave back some of its rebound on Friday, but it was still the top performer last week:

US stock index performance table for week ending 5/21/20. 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 real estate (+1.1%), health care (+0.9%), and utilities (+0.4%). The weakest sectors were energy (-2.6%), industrials (-1.5%), and materials (-1.2%).

Highlight reel: Aemetis (AMTX) +21% to $12.30 on Tuesday, Reata Pharmaceuticals (RETA) +24% to $102.63 on Wednesday. On the downside, Iovance Biotherapeutics (IOVA) -39% to $16.33 on Wednesday, Black Diamond Therapeutics (BDTX) -37% to $13.93 on Thursday.

Futures action: Gold extended what is now its longest-lasting rally since last year’s run to record highs. June gold (GCM1) gained $38.60 last week to close Friday at $1,876.70/ounce after hitting a 19-week high of $1,891.30 on Wednesday. After tagging a new contract high of $67.02/barrel on Tuesday, July WTI crude oil (CLN1) tumbled to $61.56 early Friday before rebounding to close at $63.58. Biggest up moves: June pork cutout (PRKM1) +7.1%, July hogs (HEN1) +6.9%, July lumber (LBSN1) +4.5%. Biggest down moves: May bitcoin (BTCK1) -28.4%, June cheese (CSCM1) -6.4%, June milk (DCM1) -6.4%.

Coming this week

This week’s numbers include:

Monday: Chicago Fed National Activity Index
Tuesday: S&P/Case-Shiller Home Price Index, New Home Sales, Consumer Confidence
Thursday: Durable Goods Orders, GDP (Q1 2nd estimate), Pending Home Sales
Friday: Personal Income and spending, Advance Goods Trade Balance, Advance Wholesale and Retail Inventories, PCE Prices, Chicago PMI, Consumer Sentiment (final)

Retail companies highlight the earnings calendar for a second week:

Monday: America's Car-Mart (CRMT), Lordstown Motors (RIDE)
Tuesday: AutoZone (AZO), Agilent (A), Cracker Barrel (CBRL), Toll Brothers (TOL), Urban Outfitters (URBN), Intuit (INTU), Nordstrom (JWN), Zscaler (ZS)
Wednesday: American Eagle Outfitters (AEO), elf Beauty (ELF), Nvidia (NVDA), Dick's Sporting Goods (DKS), Snowflake (SNOW), Pinduoduo (PDD), Williams-Sonoma (WSM), Okta (OKTA)
Thursday: Anaplan (PLAN), Ulta Beauty (ULTA), Best Buy (BBY), Burlington Stores (BURL), Box (BOX), Dollar General (DG), Costco (COST), Dell (DELL), Dollar Tree (DLTR), Gap (GPS), Guess (GES), HP (HPQ), Salesforce.com (CRM), VMware (VMW)
Friday: Big Lots (BIG)

This week’s IPOs include:

Wednesday: Paymentus Holdings (PAY), ZipRecruiter (ZIP), Flywire (FLYW)
Thursday: Figs (FIGS)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

Market Mover Update: Cybersecurity stocks were on board with last week’s tech rebound, including Palo Alto Networks (PANW), which rallied 5.8% on Friday after releasing earnings on Thursday (see “Stock security blanket”). Zscaler (ZS) and Okta (OKTA) are scheduled to release their numbers this week.

 

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1 Reuters. Ahead of jobs miss, some Fed officials edged towards 'taper' debate. 5/19/21.

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