Stocks get late-week lift

05/06/19
  • Stocks slump after Fed, surge after jobs
  • Small-caps lead, tech lags
  • This week: Inflation numbers, Disney and Lyft earnings

A busy week in the markets didn’t disappoint—key economic numbers and big-time earnings appeared to tug traders back and forth as stocks hit new highs, backed off, then went on the charge again as the week drew to a close.

After starting last week with back-to-back record closes, the S&P 500 (SPX) appeared to get a minor case of altitude sickness, turning sharply lower from Wednesday’s intraday all-time high in the wake of what, in other circumstances, would likely have been a ho-hum (“no change”) FOMC meeting and interest rate announcement.

S&P 500 (SPX), 3/6/19–5/3/19. S&P 500 (SPX) price chart. Down on Fed, up on jobs.

Source: Power E*TRADE


Amid recent indications of low inflation, however—not to mention a public call for lower interest rates from the White House1—some market players may have been disappointed the Fed didn’t at least suggest a rate cut may be on the horizon.

But Friday’s muscular jobs report—the unemployment rate dropped to a nearly 50-year low of 3.6%, and the number of new jobs (263,000) was around 30% higher than estimated—reversed the slump and closed out the week with a running of the bulls.

And although it was an essentially flat week for the broad market and tech, the small-cap Russell 2000 (RUT) followed up on the previous week’s bullish momentum with a first-place finish among US indexes, and a push back into second place for the year:

US stock index performance table for week ending 5/3/19. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE


Sector breakdown: The top-performing S&P 500 sectors last week were health care (+3.4%, second straight week at the top), financials (+2.4%), and real estate (+1.9%). The worst-performing sectors were energy (-3.1%, take a look a crude oil chart), materials (-2.4%), and industrials (-1.6%).

Power Moves: There was no shortage of big moves last week, for bulls and bears. But as often happens, the most notable move wasn’t the biggest: Alphabet’s (GOOGL) -7.7% post-earnings drop on Tuesday, one day after the stock made a new all-time high, kicked high-flying tech in the shins. The stock lost ground for two more days before going green on Friday.

Other highlights: Impinj (PI) soared 35% on Tuesday, MFC Bancorp shot up (MFCB) 37% on Wednesday, and Digimarc (DMRC) exploded 45% to the upside on Thursday. On the downside, on Wednesday Pulse Biosciences (PLSE) tumbled -29%, Nabriva Therapeutics (NBRV) shed -27%, and Pitney Bowes (PBI) lost -24%.

Futures action: June WTI crude oil (CLM9) extended its biggest pullback since December, falling to $60.95/barrel on Thursday—an 8% decline from the April 23 close—and closing out the week around $62. June gold (GCM9) turned lower mid-week, testing its April low around $1,267.50/ounce on Thursday before rebounding on Friday to around $1,279.50.

Coming this week

It’s a relatively light week on the economic calendar, but in the wake of last week’s Fed announcement, the US inflation numbers (PPI and CPI) on Thursday and Friday may attract more scrutiny than usual.

Monday: Nada.

Tuesday: JOLTS, Consumer Credit

Wednesday: China unemployment, PPI, and CPI; Germany Industrial Production

Thursday: International Trade, Producer Price Index (PPI), Wholesale Trade.

Friday: Consumer Price Index (CPI)

Earnings season keeps rolling, with lots of energy, tech, cannabis, and biopharma—plus Disney (DIS) and Lyft’s (LYFT) inaugural report:                  

Monday: Sysco (SYY), Tyson Foods (TSN), American International (AIG), Electronics For Imaging (EFII), Invitation Homes (INVH), Mosaic (MOS), Occidental Petro (OXY)

●Tuesday: Clovis Oncology (CLVS), Allergan (AGN), Emerson (EMR), LGI Homes (LGIH), Regeneron Pharma (REGN), Spark Therapeutics (ONCE), Aurora Cannabis (ACB), Electronic Arts (EA), Lyft (LYFT), Marriott (MAR), Match Group (MTCH), Qorvo (QRVO), TripAdvisor (TRIP)

●Wednesday: Horizon Pharma (HZNP), Marathon Petroleum (MPC), Wendy's (WEN), Albemarle (ALB), Etsy (ETSY), Evergy (EVRG), Immunomedics (IMMU), Redfin (RDFN), Roku (ROKU), SailPoint (SAIL), Sunrun (RUN), Walt Disney (DIS)

●Thursday: Bioscrip (BIOS), Brookfield Asset Management (BAM), Cardinal Health (CAH), Care.com (CRCM), CenterPoint (CNP), Duke Energy (DUK), EPAM Systems (EPAM), Focus Financial (FOCS), Keurig Dr Pepper (KDP), Tapestry (TPR), Ubiquiti Networks (UBNT), Booking Holdings (BKNG), Dropbox (DBX), Symantec (SYMC), Yelp (YELP), Zillow (ZG)

Friday: Enbridge (ENB), Enerplus (ERF), JD.com (JD), Viacom (VIAB)

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 think our policy stance is appropriate at the moment; we don’t see a strong case for moving it in either direction.

Fed Chairman Jerome Powell on holding interest rates steady .2

Win, place, show. The SPX’s 17.5% year-to-date return as of Friday—the 85th trading day of the year—was higher than the returns of all other years except two (1975 and 1987) since 1950.

The SPX’s Friday close of 2,945.64 was the highest the index has ever ended a week, and less than one point off its all-time high close.

On Friday, the Russell 2000 closed above its mid-October (and February) highs, an upside breakout similar to ones the SPX and NDX made in March.

 

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1 CNBC.com. Dow drops 120 points, stocks fall for a second day after Fed Chief Powell signals no rate cut soon. 5/2/19.

2 Reuters. Traders see fading prospects for Fed rate cut. 5/1/19.

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