Tech sees red

03/08/21
  • Tech dump continues, NDX negative for year
  • Jobs report surprises, crude oil soars
  • This week: Rate watch, inflation numbers

More inflation jitters, more tech selling, and the deepest pullback for US stocks since October.

That was the story of last week before a monster Friday turnaround flipped what looked to be a guaranteed weekly loss for the S&P 500 (SPX) into a gain.

For the most part, investors continued to punish technology stocks, and for the second week in a row a Thursday surge in long-term interest rates appeared to tip the market over the bearish edge, briefly sending the SPX into negative territory for the year before Friday’s dramatic rebound:

Chart 1: S&P 500 (SPX), 12/28/20–3/5/21. S&P 500 (SPX) price chart. Friday reversal.

Source: Power E*TRADE


The headline: Tech skid hits three weeks, Nasdaq 100 (NDX) flirts with correction.

The fine print: Stock index futures jumped after the release of Friday’s strong jobs report, but so did the 10-year T-note yield, which hit 1.63%—its highest level of the year. Stocks had trouble holding their early gains, and the NDX dipped into correction territory (10% below February 12’s record close) for a second-straight day before the fast-and-furious intraday reversal lifted the tech index back above that threshold.

The number: 379,000, the number of jobs added to the US economy in February—more than twice as many as expected—and almost all of it fueled by the hospitality industry.1

The scorecard: Thanks to Friday’s midday pivot, the SPX and Dow both ended the week in the green:

US stock index performance table for week ending 3/5/20. 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 energy (+3.9%), industrials (+2.4%), and communication services (+2.4%). The weakest sectors were consumer discretionary (+0.7%), real estate (+1.2%), and utilities (+1.6%).

Highlight reel: On Monday, Ontrak (OTRK) -46% to $31.62. On Tuesday, Rocket Companies (RKT) +71% to $41.60 (then -33% to $28.01 on Wednesday). On Thursday, Five Prime Therapeutics (FPRX) +79% to $38 (on news Amgen would acquire it), and Purple Innovation (PRPL) -33% to $24.37.

Futures action: Oil rallied to its highest level in nearly two years, with April WTI crude oil (CLJ1) tagging $66.09/barrel on Friday as OPEC+ decided not to lift supply curbs.2 Slumping gold fell below $1,700/ounce for the first time since last June, with April gold (GCJ1) falling as low as $1,683 on Friday and closing at $1,698.50.

Last week's biggest futures up moves: May Brent crude oil (BK1) +8%, April WTI crude oil (CLJ1) +7.8%, March bitcoin (BTCH1) +7.4%. Last week's biggest futures down moves: May coffee (KCK1) -6.3%, May silver (SIK1) -4.6%, April platinum (PLJ1) -4.4%.

Coming this week

This week’s earnings include:

Monday: Casey’s General Stores (CASY), Kalvista Pharmaceuticals (KALV)
Tuesday: Sumo Logic (SUMO), Array Technologies (ARRY), Cantel Medical (CMD), Dick's Sporting Goods (DKS), Ontrak (OTRK)
Wednesday: Oracle (ORCL), Cloudera (CLDR), Campbell Soup (CPB)
Thursday: Ulta Beauty (ULTA), Buckle (BKE), JinkoSolar (JKS), DocuSign (DOCU)
Friday: Kirkland's (KIRK)

IPOs this week include:

Wednesday: Roblox (RBLX)
Thursday: First High-School Education Group (FHS), Coupang (CPNG)

Inflation numbers highlight the economic calendar:

Monday: Wholesale Inventories
Tuesday: NFIB Business Optimism Index
Wednesday: Consumer Price Index (CPI)
Thursday: JOLTs Job Openings
Friday: Producer Price Index (PPI), Michigan Consumer Sentiment (prelim)

Go to the E*TRADE market calendar for an up-to-date earnings schedule and 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 scoop on NDX three-week losing streaks

The NDX may be only 14 trading days and 8.3% removed from its all-time high, but the tech index has wrinkled many brows by registering its first three-week losing streak since September, and falling briefly into correction territory in the process.

Downturns of this length aren’t uncommon, though—the NDX has had 79 three-week (or longer) losing streaks since 1985. Here’s what it’s done after them:

1. The index closed higher the next week 40 times and lower 39 times.
2. The index closed higher the week after that 64 out of 79 times.3

So, in the past, whenever the NDX closed down for a third straight week, the odds of a higher close the next week were a little better than a coin toss, but the odds of a higher close the week after that were around 81%.

Also, after three straight down weeks, the NDX was closer to the sell-off’s eventual bottom than its top in 55 out of 79 cases (70% of the time): On average, it was 7.6% below the high that preceded the pullback, but only 4.3% from its eventual pullback low.

 

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1 CNBC.com. Job growth surges in February on hiring jump in restaurants and bars. 3/5/21.
2 Bloomberg.com. Oil Soars Above $65 With Saudi Supply Gamble Buoying Crude Bulls. 3/5/21.
3 Based on Nasdaq 100 (NDX) weekly closing prices, 1985–2021. Supporting document available upon request.

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