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05/28/19
  • Third-straight down week for stocks as trade woes persist
  • Crude oil tumbles below $60, Theresa May packs her bags
  • This week: GDP, Uber earnings, Memorial Day pattern

With only four days left in the month, the US stock market is likely headed for its first losing May in seven years after a see-saw week driven by—what else?—trade headlines ended with the US stock market near a six-week low.

It was another day-to-day bear-bull showdown. A week that started bearishly after the US banned companies from doing business with Chinese tech firm Huawei flipped bullish on Tuesday when the White House announced exceptions to the policy. Tech, especially semiconductor stocks, felt the tug-of-war the most.

But stocks slumped again Wednesday (barely reacting to the afternoon release of Fed minutes) on reports the administration was prepared to embargo even more Chinese firms,1 and by Thursday the pessimism had dropped the S&P 500 (SPX) close to the roughly six-week low it made on May 13:

S&P 500 (SPX), 4/22/19–5/24/19. S&P 500 (SPX) price chart. Jagged week.

Source: Power E*TRADE


A quiet rally on Friday heading into Memorial Day weekend (with barely passing notice of the resignation of British Prime Minister Theresa May after months of failed Brexit negotiations2) wasn’t enough to make a significant dent in market's losses.

The SPX’s first three-week losing streak since December was outdone by the Dow Jones Industrial Average’s (DJIA) fifth-straight losing week. Here’s how the indexes stacked up as of Friday:

US stock index performance table for week ending 5/24/19. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE


Sector breakdown: The strongest S&P 500 sectors last week were utilities (+1.8%), health care (+1.3%), and real estate (+0.3%). The worst performers were energy (-3.4%), information technology (-2.7%), and consumer discretionary (-2.2%)..

Power moves: On Tuesday Circor (CIR) shot up +42% to $43.33, while Kohls (KSS) headlined a mostly bad week for retail by falling -12% to $55.67. Sea Ltd (SE) jumped +24% to $31 on Wednesday, but ePlus (PLUS) slid -21% to $72.62 on Thursday.

Futures action: July WTI crude oil (CLN9) appeared to slide in sympathy with stocks on Wednesday and Thursday, falling below $57.50/barrel for the first time since March but recovering some ground on Friday to end the week around $58.90.

June gold (GCM9) retreated to support below $1,270/ounce on Tuesday—the level of its April and early-May swing lows—before turning sharply higher on Thursday and closing out the week around $1,284.50.

Coming this week

GDP highlights the economic calendar, but the remainder of this month’s housing numbers may offer some further insight into the potential outlook for still-resilient homebuilder stocks.                                                                                              

Tuesday: S&P Corelogic Case-Shiller HPI, FHFA House Price Index, Consumer Confidence

Wednesday: Germany Unemployment Rate, Bank of Canada Announcement

Thursday: GDP, International Trade in Goods, Retail Inventories, Wholesale Inventories, Pending Home Sales Index

Friday: Personal Income and Outlays, Consumer Sentiment

Earnings this week include:

●Tuesday: American Woodmark (AMWD), Momo (MOMO), Workday (WDAY)     

●Wednesday: Bank of Montreal (BMO), Baozun (BZUN), Dick's Sporting Goods (DKS), Keysight (KEYS), Palo Alto Networks (PANW), PVH (PVH)        

●Thursday: Burlington Stores (BURL), Dollar General (DG), Dollar Tree (DLTR), Tech Data (TECD), Costco (COST), Dell (DELL), Gap (GPS), Uber (UBER), Ulta Beauty (ULTA), VMware (VMW), Williams-Sonoma (WSM)

Friday: Big Lots (BIG)

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.

We could have a heck of a nice second half.

Leuthold Group chief investment strategist Jim Paulsen, on the US market’s prospects—if tariff wars don’t go on forever. 3

Summer breeze. Maybe it’s the unofficial arrival of summer that puts traders in a good mood, but for whatever reason, the market often seems to come back from Memorial Day weekend feeling refreshed…and bullish.

Consider this: The S&P 500’s (SPX) average four-day return since May 1971 has been 0.13%, and 55% of all four-day periods have been gainers. By contrast, the SPX has rallied 62.5% of the time in the four days after Memorial Day, and its average gain has been 0.54%—more than three times the size of its typical four-day gain.

 

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1 Bloomberg.com. U.S. Stocks Decline as China Trade Tensions Flare: Markets Wrap. 5/22/19.

2 The Economist. British politics after Theresa May. 5/24/19.

3 CNBC.com. Trade war’s ‘wall of worry’ will spark a rally, Wall Street bull Jim Paulsen says. 5/21/19.

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