Role reversal

02/10/20
  • Stocks ring up best week in 8 months as coronavirus story fades
  • New jobs surge, Tesla goes into overdrive
  • This week: The latest inflation and retail sales numbers

The question casually posed in this space last Monday—would a new month usher in a rebound from the year’s first pullback?—got an emphatic answer, as US stocks erased coronavirus-scare losses and rallied to new all-time highs last week.

Despite taking a bit of a siesta on Friday, the S&P 500 (SPX) racked up its biggest weekly gain since last June and punched out new record highs on Wednesday and Thursday.

Chart 1: S&P 500 (SPX), 12/3/19–2/7/20. S&P 500 (SPX) price chart. Rebound to records.

Source: Power E*TRADE


The headline: Stocks reclaim highs as coronavirus worries recede.

The fine print: The Senate acquitted President Trump on all impeachment charges last Wednesday, and China cut tariffs on $75 billion of US goods.1

The numbers: 225,000, the number of new US jobs created in January, which blew past the consensus estimate of 158,000. The unemployment rate upticked to 3.6%, but that was because more people entered the labor force.2 Last Monday’s ISM Manufacturing Index reading of 50.9 was the first time since July the index came in above 50, the line separating manufacturing growth from contraction.

The move: +67%. That was Tesla’s (TSLA) four-day gain last Tuesday when it hit a record high of $968.99, at which point the stock was up 132% on the year. The stock closed Friday at $748.07. 

The scorecard: The tech-centric Nasdaq 100 (NDX) did the SPX one better, enjoying its best week since November 2018 and notching new records every day but Monday:

US stock index performance table for week ending 2/7/20. 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 information technology (+4.4%), materials (+4.1%), and health care (+3.9%). The weakest sectors were utilities (-0.6%), energy (+0.7%), and real estate (+1.7%).

Highlight reel: In addition to TSLA’s 20% and 14% rallies on Monday and Tuesday, Greenhill (GHL) surged 29% to $21.49 on Wednesday. On the downside, Norton LifeLock (NLOK) tumbled 40% to $17.15 on Monday, and Plantronics (PLT) fell 38% to $16.56 on Wednesday.                                                

Futures action: After falling as low as $49.31/barrel on Tuesday, March WTI crude oil (CLH0) held its ground for the remainder of the week, closing Friday around $50.40. April gold (GCJ0) broke lower last Monday and Tuesday, but rebounded to close around $1,574/ounce on Friday.

Last week's biggest futures up moves: April hogs (LHJ0) +7.6%, March E-Mini Nasdaq 100 (NQH0) +4.6%, and March cocoa (CCH0) +4.4%. Last week's biggest futures down moves: March VIX (VIH0) -8.8%, March coffee (KCH0) -4.2%, and April Brent crude oil (BJ0) -3.7%.

Coming this week

The earnings calendar has a little bit of everything—household consumer names, big tech, industrials:

●Monday: Allergan (AGN), Loews (L), Southern Copper (SCCO), Molina Healthcare (MOH), Watts Water Technologies (WTS)

●Tuesday: Under Armour (UAA), Charles River Laboratories (CRL), Exact Sciences (EXAS), Lattice Semiconductor (LSCC), Exelon (EXC), US Foods (USFD), LYFT (LYFT), Martin Marietta (MLM)

●Wednesday: Applied Materials (AMAT), Molson Coors Beverage (TAP), Marathon Oil (MRO), CVS Health (CVS), CME Group (CME), Cisco Systems (CSCO), Global Payments (GPN), ViacomCBS (CBS), Shopify (SHOP)

●Thursday: Alibaba (BABA), American International (AIG), Arista Networks (ANET), Spirit AeroSystems (SPR), NVIDIA (NVDA), Kraft Heinz (KHC), Mattel (MAT), Yelp (YELP), PepsiCo (PEP), Roku (ROKU)

●Friday: Newell Brands (NWL), PPL (PPL)

A mostly light economic calendar gets a little more crowded toward the end of the week, with inflation data on Thursday, and Retail Sales headlining a busy Friday:

●Tuesday: NFIB Business Optimism Index, JOLTS (job openings)

●Thursday: Consumer Price Index (CPI)

●Friday: Retail Sales, Imports and Exports Industrial Production, Capacity Utilization, Consumer Sentiment Index, Business Inventories

Go to the E*TRADE market calendar (login 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.

Market Mover Update. Sysco (SYY) closed out last week on a three-day win streak after puncturing the support level noted in “Risk appetite.” Northern Trust (TRST) almost filled the up gap it made last Tuesday–Wednesday (see “Options action head fake”). Facebook (FB) bucked Friday’s weakness, extending its gain since January 31 to nearly 5%.

Overall, not too shabby. Now that the first market disruption of 2020 in the books, where does the market stand? The S&P 500’s 3% YTD return as of Friday was the index’s 25th-strongest return through the first 26 trading days of the year since 1960, and well above the average of 1.2%.3

 

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1 Reuters. China to halve tariffs on some U.S. imports as virus risks grow. 2/5/20.

2 The Wall Street Journal. A Hot, but Not Overheated, Jobs Report. 2/7/20.

3 Reflects S&P 500 (SPX) daily closing prices, 12/31/1959 – 2/7/2020. Supporting document available upon request.

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