Knocking on the door

03/18/19
  • Market erases previous week’s loss, at highest level since October
  • Tech shares have biggest week of year
  • FOMC announcement due this Wednesday

Last week it took the S&P 500 (SPX) only four up days to erase the previous week’s five-day pullback. In the process, it took a small, but possibly important step toward removing the monkey of a five-month resistance level from its back.

The SPX’s biggest week of 2019 kicked off with its second-biggest day of the year—Monday’s 1.47% rally. By Friday, the SPX had pushed above the resistance level it had retreated from the previous week, closing at its highest level since October 9—that’s only four days after (and roughly 4% below) the index’s October 3 all-time high of 2,939.86.

S&P 500 (SPX), 1/2/19–3/15/19. S&P 500 (SPX) price chart. 1/28/19–3/15/19. Challenging resistance.

Source: Power E*TRADE


But the tech-focused Nasdaq 100’s (NDX) 2.11% rally last Monday, led by semiconductor stocks, introduced the momentum theme of the week: Tech strength. The NDX’s 4.15% rally last week was not only its largest one-week gain this year, it helped the NDX edge out the small-cap Russell 2000 (RUT) as the year-to-date US index leader.

The Dow Jones Industrial Average (DJIA) lagged the rest of the market, thanks mostly to a sharp sell-off in Boeing (BA), and a smaller downturn in airline stocks, in the wake of the second crash of a Boeing 737 MAX 8 airliner in the past five months. Here’s where the US indexes stood at the end of the week:

US stock index performance table for week ending 3/15/19. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE


Sector action: The top-performing S&P 500 sectors were information technology (+4.9), energy (+3.22%), and health care (+3.2%). The worst-performing sectors were industrials (+0.3%), energy (+1.7%), and utilities (+1.8%).

Highlight reel: On Wednesday Guardant Health (GH) rallied +27.64%, while Chinese e-commerce company Pinduoduo (PDD) dropped -17.45% on volume of (count ‘em) 56.11 million shares after posting a larger-than-expected quarterly loss.1 On Thursday, Wageworks (WAGE) surged 30.5%, while Tailored Brands (TLRD) tumbled -25%.

Futures watch: May WTI crude (CLK9) rallied steadily last week, climbing above $59/barrel on Friday (for the first time since November 13) before closing around $58.75. A choppy week for gold ended with the April futures contract (GCJ9) posting a small gain for the week, up 0.2% to around $1,302/ounce.

But the big move of the week came in April lean hog futures (HEJ9), which rallied 4.5% on Friday, capping a 13% gain on the week amid increased purchases from China.

Coming this week

The Tuesday-Wednesday FOMC meeting will probably get most of the trader attention this week (except for US-China trade deal and Brexit surprises), but more housing numbers and leading indicators are also on tap:

Monday: Housing Market Index

Tuesday: Factory Orders, FOMC meeting begins

Wednesday: FOMC announcement

Thursday: Leading Indicators

Friday: Existing Home Sales, Wholesale Trade

Earnings this week include:                       

Monday: Overstock.com (OSTK), Tilray (TLRY)

Tuesday: DSW (DSW), HD Supply Holdings (HDS), Michaels Stores (MIK), FedEx (FDX), Franco-Nevada (FNV), Tencent Music (TME)

Wednesday: General Mills (GIS), Pinduoduo (PDD), Five Below (FIVE), Micron (MU), Wheaton Precious Metals (WPM)

Thursday: Carnival (CCL), Conagra (CAG), Darden Restaurants (DRI), G-III Apparel (GIII), Jefferies (JEF), KB Home (KBH)

Friday: Tiffany (TIF)

Go to the E*TRADE market calendar (logon required) for an up-to-date earnings schedule, along with a complete list of splits, dividends, IPOs, economic reports, and other market events. The Active Trader Commentary also lists earnings announcements and economic report times every morning.

Ahead of schedule. As is has in just about every other respect so far this year, the stock market’s rebound from the March 4-8 pullback appears to be outpacing its historical norms. At Friday’s close, the SPX had gained 1.4% from last Monday’s close (the up day that marked the end of the five-day pullback). That’s more than six times as much as the SPX gained, on average, four days after 182 similar pullbacks since March 1969, and more than 10 times the size of the average four-day move (+0.13%) over the past 50 years.2

 

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1 Investor’s Business Daily. Pinduoduo Earnings Report Produces Wider-Than-Expected Loss. 3/13/19.

2 Supporting document available upon request.

 

 

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