Bulls test range

09/03/19
  • US stocks coming off best week since June
  • China de-escalates trade war
  • This week: Jobs report, manufacturing numbers

More yield-curve inversions and a little pre-Labor Day selling on Friday weren’t enough to derail the market last week, which ended a four-week skid and closed August on a positive note.

The S&P 500 (SPX) will start this week not too far from the top of the trading range that bottled up the market most of last month—and only 3.4% below its July all-time high:

S&P 500 (SPX), 7/12/19–8/30/19. S&P 500 (SPX) price chart. Thursday surge.

Source: Power E*TRADE


The market got its biggest shot in the arm on Thursday morning, when China ratcheted down trade tensions by—and here’s a first—foregoing the opportunity to retaliate against the latest US tariffs, and urging “cooperation with a calm attitude.”1  Boom—all major US indexes gapped higher on the open and ended the day with 1%-plus gains, pushing the week solidly into the green.

And despite Friday’s minor intraday pullback, it was the market’s strongest week since June 7. Here’s how the indexes stacked up:

US stock index performance table for week ending 8/30/19. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE


Sector roundup: The strongest S&P 500 sectors last week were industrials (+3.6%), communication services (+3.3%), and financials (+3.2%). The weakest sectors were consumer staples (+1.6%), utilities  (+1.9%), and real estate (+1.9%).

Power moves: On Wednesday Tallgrass Energy (TGE) jumped 35.61% to $19.46, while Phibro Animal Health (PAHC) tumbled -31% to $21.74.

Futures action: December gold (GCZ9) soared to $1,565/ounce last Monday—the market’s highest level since April 2013—before closing the week around $1,532.50.

October WTI crude oil (CLV9) dipped below $53/barrel on Monday, jumped to nearly $57 by Thursday, but slid around -3% on Friday to close around $55.10.

And, thanks to falling interest rates, September 10-year T-notes (ZNU9) hit another contract high of 131.61 on Monday before settling Friday around 131.10.

Coming this week

It may only be a four-day week, but it promises to be action-packed, with the top-of-the-month manufacturing, construction, and jobs numbers on tap:

Tuesday: PMI Manufacturing Index, ISM Manufacturing Index, Construction Spending

Wednesday: International Trade, Beige Book

Thursday: Productivity and Costs, PMI Services Index, Factory Orders, ISM Non-Manufacturing Index

Friday: Employment report

Earnings this week include:

●Tuesday: Coupa Software (COUP), Healthequity Inc (HQY), RH (RH)

●Wednesday: American Eagle Outfitters (AEO), Palo Alto Networks (PANW), Navistar International (NAV), Finisar (FNSR)

●Thursday: Lululemon Athletica Inc (LULU), G-III Apparel (GIII), Zoom Video Communications Inc (ZM), Ciena Corp (CIEN), Crowdstrike (CRWD), DocuSign (DOCU), Guidewire Software Inc (GWRE)

●Friday: National Beverage Corp (FIZZ)

Go to the E*TRADE market calendar (logon 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.

The single most critical issue or risk for the market and really the global economy is the trade policy and uncertainty coming out Washington.

Amanda Agati, PNC Financial co-chief investment strategist .2

Batting .800. Last week the market padded its resume for bouncing back after month-long losing streaks (see "Silver linings in market clouds"). The SPX has now gained ground the week after eight of its past 10 four-week losing streaks.

 

 

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1 Bloomberg. China Indicates It Won’t Retaliate Now on New U.S. Tariffs. 8/29/19.

2 CNBC.com. Market’s ‘most critical’ risk is the trade war, PNC warns. 8/27/19.

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