Another S&P 500 pullback gets bought
05/22/17

Stocks pulled back last week, and once again traders bought the dip.

It was a wild ride for the S&P 500, which touched a new high on Tuesday – only to suffer its biggest drop in eight months the following session. The index clawed back on Thursday and Friday to end the week down just 0.39 percent.

Political news took center stage. Nerves were rattled in the U.S. by stories regarding President Trump’s firing of FBI head James Comey, while reports of potential corruption in Brazil hammered emerging markets.1 On a positive note, oil continued to rebound from nine-month lows after sources told Reuters that pressure from American shale fields will keep Saudi and Russian crude underground.2

Software maker Autodesk (NASDAQ: ADSK) was the S&P 500’s top gainer last week, ripping 15 percent to new highs on strong quarterly results.3 Biotech company Incyte (NASDAQ: INCY) was the runner-up with a 14 percent gain after one of its drug candidates showed success against tumors.4

Foot Locker (NYSE: FL) wasn’t so lucky. Sharing in the fate of many other brick-and-mortar merchants in a click-and-order world, the shoe-retailer got stomped 22 percent after profit and sales missed estimates.5 That landed it at the bottom of the S&P’s weekly performance table. Mallinckrodt (NASDAQ: MNK) was the second-worst performer, down 12 percent.

S&P 500 6-month chart

Source: OptionsHouse by E*TRADE

Turning back to the broader S&P, chart watchers likely noticed that last week’s low occurred at the same 50-day moving average where the index bounced in March and April. If that level holds, it will be the third straight month with a higher low – a potential ascending triangle.

None of the popular sectors moved more than 1 percent in the week. But at a more granular level, traders watched as Chinese Internet stocks like Alibaba (NASDAQ: BABA), Weibo (NASDAQ: WB), and Sina (NASDAQ: SINA) kept marching to new highs. Agriculture, metals, and homebuilders also bounced, while retailers and banks struggled.

The forward calendar starts quiet, although there are some potential fireworks later in the week. Nothing important is scheduled for today or tomorrow. Wednesday brings minutes from the Federal Reserve’s last meeting, plus earnings from home-improvement chain Lowe’s (NYSE: LOW) and tech firms HP (NYSE: HPQ) and NetApp (NASDAQ: NTAP).

Things get more interesting Thursday as OPEC meets, while retailers Costco (NASDAQ: COST) and Best Buy (NYSE: BBY) announce results. All eyes shift to the economy Friday morning with the one-two punch of revised gross domestic product and durable-goods orders an hour before the opening bell.

 

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1. CNBC: Brazil stocks plunge on emerging political scandal post worst day since 2008. 5/18/17.

2. Reuters: Saudi Arabia, Russia push to extend oil output cut until March 2018. 5/15/17. New York Times: As Their Clout Wanes, Saudi Arabia and Russia Extend Oil Production Cuts. 5/15/17.

3. Investors Business Daily: CAD Software Firm Autodesk Soars On Quarterly Earnings Beat. 5/18/17.

4. Financial Times: Incyte shares lifted by positive early-stage trial results for cancer drug. 5/17/17.

5. CNBC: Foot Locker tanks 16% on weak earnings as sneaker sales lag. 5/19/17.