S&P 500 in tight range as events loom
04/24/17

Stocks squeezed into a tight range last week as investors held their breaths before the French presidential election and a jam-packed calendar of upcoming events.

The S&P 500 rose 0.86 percent between Thursday, April 13, and Friday, April 21. (Remember April 14 was a holiday.) Few may have noticed, but it was actually the biggest weekly gain since mid-February.

The index has been making lower highs and higher lows for more than a month, forming a triangle along its 50-day moving average. Chartists believe that kind of pattern often forms ahead of a big event, with the potential for a move either higher or lower. Results from France’s election could be the catalyst for a break in either direction.

Earnings were the main driver last week as dozens of S&P 500 companies issued quarterly results. Semiconductor-equipment provider Lam Research (NASDAQ: LRCX) was the best performer overall, surging 12 percent after profit, revenue, and guidance surprised to the upside. Marketing firm Alliance Data Systems (NYSE: ADS) also beat estimates, lifting its stock 11 percent and landing it at No. 2 on the rankings.1

Toymaker Mattel (NASDAQ: MAT), on the other hand, found itself at the bottom of the totem pole with a 13 percent drop, weighed down by a glut of unsold Barbie dolls. Biotechnology company Incyte (NASDAQ: INCY) fell almost as much, after regulators said more information would be needed for approval of a new arthritis drug. 2

Political events in Washington were also back in the news as President Trump looked to ease bank regulation and potentially crack down on foreign steel imports.3 China and Europe weighed in with encouraging economic reports, as well.4

S&P 500 3-month chart

Source: OptionsHouse by E*TRADE

Industrials were the best sector overall last week, buoyed by strong results at companies including Snap-on (NYSE: SNA), CSX (NYSE: CSX), and Rockwell Collins (COL). Consumer-discretionaries were close behind as value hunters returned to retail stocks and auto-related names.

Energy led to the downside after crude oil fell the most since early March. Health-care was the second-worst performer amid weak earnings and concerns about increased political risk and borrowing plans.

The forward calendar is packed with potential catalysts. Not only will it be the busiest week for S&P 500 companies this earnings season (at least 189 index report); it also features key budget negotiations in Congress and several important economic events. Here are a few biggies:

  • Today: At least 12 S&P 500 companies have earnings, including Halliburton (NYSE: HAL), Express Scripts (NASDAQ: ESRX), and Whirlpool (NYSE: WHR).
  • Tuesday: Consumer confidence, new-home sales. At least 44 S&P 500 companies have earnings, including Coca-Cola (NYSE: KO), 3M (NYSE: MMM), McDonalds (NYSE: MCD), Texas Instruments (NASDAQ: TXN), and Juniper Networks (NASDAQ: JNPR).
  • Wednesday: At least 51 S&P 500 companies have earnings, including Procter & Gamble (NYSE: PG), PepsiCo (NYSE: PEP), and United Technologies (NYSE: UTX).
  • Thursday: European Central Bank meeting, U.S. durable goods, initial jobless claims, trade balance. At least 65 S&P 500 companies have earnings, including Microsoft (NASDAQ: MSFT), Intel (NASDAQ: INTC), Alphabet (NASDAQ: GOOGL), Ford Motor (NYSE: F), and American Airlines (NASDAQ: AAL).
  • Friday: First-quarter gross domestic product. At least 17 S&P 500 companies report earnings, including Exxon Mobil (NYSE: XOM) and General Motors (NYSE: GM).

 

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1. Barron's: Lam Reseach Jumps 4% on FYQ3 Beat, Higher Q4 View. 4/18/17. 2. RTT News: Alliance Data Q1 Results Beat Estimates; Backs FY17 View - Quick Facts. 4/20/17.

2. Marketwatch.com: Eli Lilly and Incyte stock drops after FDA fails to approve rheumatoid arthritis drug. 4/17/18. Reuters: Mattel cuts sales forecast after inventory overhang slams results. 4/21/17.

3. The Washington Times: Trump targets key Dodd-Frank financial regulations and taxes in new executive actions. 4/21/17. Reuters: Trump targets cheap Chinese steel in probe, rallying U.S. steel stocks. 4/21/17.

4. Reuters: Steel, stimulus drive China's strongest economic growth since 2015. 4/17/17. Reuters: Euro zone economy races into second-quarter with bumper growth: PMI. 4/21/17.

 

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