Fed on deck

  • Tech sets pace, market follows—to new highs
  • Antitrust probe reappears, US–China talks to resume
  • This week: FOMC, jobs report, and let’s not forget earnings

Solid earnings last week and a better-than-expected GDP number on Friday…

Blah, blah, blah.

Who are we kidding? Even though the S&P 500 (SPX) and Nasdaq 100 (NDX) both rallied to new records, last week’s trading was really just a prelude to this week’s Fed meeting, which is widely expected to conclude Wednesday with the central bank announcing it will cut interest rates by 0.25%.

Given the lack of drama about the meeting’s basic outcome, whether the stock market gets a super-sized charge out of the announcement—up or down—will likely depend on whatever hints the Fed drops about its outlook and intentions going forward. A few words here or there could make all the difference.

S&P 500 (SPX), 5/31/19–7/26/19. S&P 500 (SPX) price chart. Two new records.

Source: Power E*TRADE

The chart above shows that Thursday was the only blip in what was otherwise a steady climb for the S&P 500 (SPX) last week, highlighted by record highs on Wednesday and Friday.

A red-hot tech sector—led by a white-hot semiconductor sector—brushed off reports that the Department of Justice (DOJ) has already launched an antitrust investigation of big tech companies. The NDX topped the list of weekly US index returns, while the Dow Jones Industrial Average (DJIA) rotated to last place:

US stock index performance table for week ending 7/26/19. 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 communication services (+4.7%), financials (+2.7%), and information technology (+2.5%). The weakest sectors were utilities (-0.6%), energy (-0.4%), and health care (+0.4%).

Power moves: On Thursday Anika Therapeutics (ANIK) leaped +29% to $52.60, while Align Technology (ALGN) tumbled -27% to $200.90.

Futures action: After rallying early in the week on still-simmering Iran tensions, September WTI crude oil (CLU9) pulled back to end the week more or less flat, around $56.20/barrel. August gold (GCQ9) drifted sideways, closing Friday around $1,417.50/ounce. The British pound dropped to multi-year lows in the aftermath of Boris Johnson’s installation as the new UK Prime Minister last week. September British pound futures (6BU9) fell to 1.2405 on Friday—the lowest the market has been since April 2017.

Coming this week

With all the focus on Wednesday’s Fed meeting, it’s easy to forget there’s also a jobs report on Friday, as well as key manufacturing data on Thursday:

Monday: Bank of Japan Announcement

Tuesday: Personal Income and Outlays, S&P Corelogic Case-Shiller HPI, Consumer Confidence, Pending Home Sales Index, FOMC meeting starts

Wednesday: ADP Employment Report, Employment Cost Index, FOMC meeting announcement

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

Friday: Employment report (jobs), International Trade, Consumer Sentiment, Factory Orders

The week’s pivotal economic numbers will share the spotlight with a flood of earnings—1,000 companies are scheduled to report between Tuesday and Thursday. These are highlights—check back each day for a more comprehensive lineup:

●Monday: Baidu (BIDU), Beyond Meat (BYND), NXP Semiconductors (NXPI)

●Tuesday: Eli Lilly (LLY), Verisk Analytics (VRSK), Apple (AAPL), Amgen (AMGN), Under Armour (UAA), Lattice Semiconductor (LSCC), Procter & Gamble (PG), ConocoPhillips (COP), Merck (MRK), GrubHub (GRUB), Pfizer (PFE), Mastercard (MA)

●Wednesday: Apache (APA), Molson Coors Brewing (TAP), Global Blood Therapeutics (GBT), CME Group (CME), General Electric (GE), Occidental Petroleum (OXY), Lam Research (LRCX), Humana (HUM), Qualcomm (QCOM), SkyWest (SKYW)

●Thursday: Archer Daniels Midland (ADM), Arista Networks (ANET), Yum Brands (YUM), Dunkin' Brands (DNKN), Crocs (CROX), Kellogg (K), General Motors (GM), United States Steel (X), Verizon (VZ), GoDaddy (GDDY), Qorvo (QRVO), Pinterest (PINS)

●Friday: Exxon Mobil (XOM), Chevron (CVX), Seagate Technology (STX)

This week’s IPOs include:

●Thursday: Rapt Therapeutics (RAPT), Sundial Growers (SNDL), Dynatrace (DT)

●Friday: WiIMi Hologram Cloud (WIMI)

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.

Word on the Street

The bar for corporate earnings has been set quite low, and we don’t think it will take much to surprise on the upside.

Jon Adams, senior investment strategist at BMO Global Asset Management.1

Market on the run. Last week the SPX ran its streak of consecutive all-time weekly highs to four—quite a run. Experienced traders know that when a market is setting records, to the upside or downside, it’s a good idea to check out how things have played out in similar situations in the past.

Since 1961, the SPX has put together four consecutive one-year (or longer) new weekly highs 53 previous times. The next week the index made a higher weekly high 30 times (57% of the time), but closed higher only 25 times (47% of the time).2

Remember, even the hottest moves cool off every once in a while.

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1  The Washington Post. US stocks drift sideways as curtain rises for earning season. 7/15/19.

2 Supporting document available upon request.

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