Bulls make a push

  • Market goes “risk on” as debt-ceiling talks progress
  • Traders lean into tech, bonds drop as yields climb
  • This week: FOMC minutes, Fed inflation, durable goods

It didn’t exactly represent a major shift in the market landscape, but last week’s burst of bullish momentum did result in a couple of noteworthy milestones.

After hopeful statements from the White House and congressional leaders about resolving the debt-ceiling impasse and avoiding a default, the S&P 500 (SPX) broke out of an increasingly narrow trading range to post its biggest weekly gain since March and hit its highest level since last August, despite a lower close on Friday:

Chart 1: S&P 500 (SPX), 3/21/23–5/19/23. S&P 500 (SPX) price chart. New 2023 highs.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.) Note: It is not possible to directly invest in an index.

The headline: Broad market hits new 2023 highs.

The fine print: The question now is whether last week’s short-term breakout will have legs. Although it pushed the SPX to a roughly nine-month high, that’s still only slightly above February’s former year-to-date high—around the approximate level (4,200) Morgan Stanley & Co. analysts think could continue to act as resistance.1 Also, while President Biden and House Speaker Kevin McCarthy both voiced confidence the US would not default on its debt, neither announced a deal had been struck.2 Negotiations are ongoing.

The number: 3.69%, Friday’s 10-week high in the benchmark 10-year T-note yield.

The scorecard: The Nasdaq 100 (NDX) led the market for the fourth week in a row and pushed its 2023 return above 26%—nearly three times as much as the SPX:

US stock index performance for week ending 5/19/23. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation.)

Sector returns: The strongest S&P 500 sectors last week were information technology (+4.2%), communication services (+2.9%), and consumer discretionary (+2.6%). The weakest sectors were utilities (-4.2%), real estate (-2.4%), and consumer staples (-1.7%).

Stock movers: Sarepta Therapeutics (SRPT) +31% to $157.19 on Monday, SciPlay (SCPL) +26% to $19.66 on Thursday. Bowlero (BOWL) -17% to $11.71 on Thursday, Foot Locker (FL) -27% to $30.31 on Friday.

Futures: A consolidating July WTI crude oil contract (CLN3) closed Friday at $71.69, up less than $2 for the week. June gold (GCM3) fell as low as $1,954.30 last Thursday, but rebounded Friday to end the week roughly $38 lower at $1,981.60. Week’s biggest up moves: July natural gas (NGN3) +11.5%, July cotton (CTN3) +7.7%. Week’s biggest down moves: July hard red wheat (KWN3) -6%, July soybeans (ZSN3) -6%.

Coming this week

This week’s numbers include:

Tuesday: S&P Global Manufacturing and Services PMIs, New Home Sales
Wednesday: FOMC minutes
Thursday: Chicago Fed National Activity Index, GDP (Q2, second estimate), Pending Home Sales
Friday: Durable Goods Orders, Personal Income and Spending, PCE Price Index, Consumer Sentiment

Several high-profile tech names are scattered throughout a second week of retail earnings:

Monday: Ryanair (RYAAY), Heico (HEI), Zoom (ZM)
Tuesday: AutoZone (AZO), BJ’S Wholesale Club (BJ), Dick’s Sporting Goods (DKS), Lowe’s (LOW), Agilent (A), Intuit (INTU), Palo Alto Networks (PANW), Toll Brothers (TOL), Urban Outfitters (URBN)
Wednesday: Analog Devices (ADI), Dycom (DY), Kohl’s (KSS), E.L.F. Beauty (ELF), Williams Sonoma (WSM), Nvidia (NVDA), Snowflake (SNOW), Splunk (SPLK)
Thursday: Best Buy (BBY), Burlington Stores (BURL), Dollar Tree (DLTR), Medtronic (MDT), Ralph Lauren (RL), Costco (COST), Marvell Technology (MRVL), Ulta Beauty (ULTA), VMware (VMW), Workday (WDAY)
Friday: Big Lots (BIG), Buckle (BKE)

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

VIX watch

When the SPX was extending last week’s up move early Friday, the Cboe Volatility Index (VIX) fell to its second-lowest level (15.85) since November 2021. That’s “typical” behavior: As the market rises, concerns about volatility tend to ease, resulting in a declining VIX.

Later, though, the VIX pushed into positive territory even though the SPX remained up for the day and hit its highest high in more than 50 trading days. The pattern of a higher VIX close signaling increased volatility despite a longer-term SPX high has tended to be followed by short-term market weakness or stagnation—as it did after the last occurrence of the pattern, on February 2.3 But as the day wore on, the SPX slipped into negative territory and ended the day with a small loss, and the VIX, appropriately, ended the day higher.

While Friday’s intraday reversal may have appeared to (counterintuitively) avoid producing a short-term bearish signal from the VIX, the SPX’s loss of momentum at a general resistance level and market’s continued stagnation (despite last week’s bump) remain reasons for traders not to become too complacent about the possibility of renewed volatility.


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1 MorganStanley.com. Investors Face Uncertainty in Stock Performance. 5/16/23.
2 CNBC.com. Biden, McCarthy say U.S. won’t default as debt talks inch forward. 5/17/23.
3 All figures reflect S&P 500 (SPX) and Cboe Volatility Index (VIX) daily price data, 1990–2023. The specific pattern parameters are: The VIX closes higher (one day after it closed lower) on the same day the SPX hits its highest closing and intraday highs of at least the past 50 trading days. Supporting document available upon request.

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