Bear prints on October
10/29/18

●Broad market off more than 10% from September high

●US Treasuries, dollar, gold climb amid selloff

●This week: Friday jobs report wraps up a busy news and earnings calendar


 

If volatility is the lifeblood of trading, short-term players have gotten a major transfusion these past couple of weeks.

US stocks stumbled again last week, breaking sharply, lurching higher, then selling off again at the end of the week to push most major indexes into the red for the year, and all of them down 10% or more from their record highs.

S&P 500 (SPX), 5/23/18–10/26/18. S&P 500 (SPX) price chart. Ups and downs.

Source: OptionsHouse

The S&P 500 (SPX) pulled back modestly on Monday, followed through with a 2.3% intraday drop on Tuesday, and then added a -3.1% exclamation point on Wednesday that took it to its lowest level since early May. The Nasdaq 100 (NDX) was even harder hit, shedding 4.6% on Wednesday and hitting correction territory (down 10% or more from a high). The Russell 2000 (RUT) extended its correction to 15.5%.

After a 3.7% dive by Japan’s Nikkei 225 index, Thursday looked like it might be getting ready to dish out more of the same, but European indexes traded higher, and the US built on the bullish momentum with a 1.9% gain by the SPX and a 3.2% jump by the NDX. But despite a strong GDP report, Friday closed the door on any hopes of a rebound with another tech-driven selloff that dropped the SPX 9.29% below its September 20 close of 2930.75. Here’s the index breakdown for last week:

US stock index performance table for week ending 10/26/18

Source: OptionsHouse (data)

Sector action: Not surprisingly, defensive sectors maintained their dominance last week, with the trio of real estate (+1%), consumer staples (+1.4%), and utilities (+2.1%) again topping the list of strongest S&P 500 sectors. The worst-performing sectors were energy (-7.1%), industrials (-5.6%), and financials (-5.3%).

Highlight reel: Amazon (AMZN) traders may have been rubbing their whiplashed necks after the stock fell more than $100 (6%) on Wednesday, rallied $118 (7%) during Thursday’s regular trading session, and then immediately dropped as much as $167 (10.21%) in the post-market after a releasing a disappointing sales forecast and missing revenue estimates.

Tesla (TSLA) shrugged off Tuesday’s weakness by jumping 12.7%, and then tacked on an identical percentage gain on Thursday after beating earnings and showing its first quarterly profit.1  

Microsoft (MSFT) checked in with a +5.8% post-earnings rally on Thursday, but Twitter (TWTR) stole the show with a 20% intraday moonshot after releasing its quarterly numbers, eventually closing up 15.5% on the day.

Futures watch: December gold futures (GCZ8) rallied above $1,243/ounce on Tuesday, their highest level since July, and ended the week around $1,236.

December WTI crude oil futures (CLZ8) broke nearly 5% on Tuesday, falling to $66.06/barrel amid news Saudi Arabia was increasing production to a near-record 10.7 million barrels a day.2

December 10-year T-note futures (ZNZ8) reached 119.19—it’s highest level in more than a month—as sliding stocks pushed money into “safe-haven” markets.

The week ahead

This week we transition from October to November, which means a packed economic calendar that crescendos with Friday’s jobs report:

Monday: Personal Income and Outlays                         

Tuesday: S&P Corelogic Case-Shiller Housing Price Index, Consumer Confidence; Germany Unemployment Rate

Wednesday: Employment Cost Index, EIA Petroleum Status Report; China PMI Manufacturing Index, European Union Unemployment Rate, Canada Monthly GDP

Thursday: Productivity and Costs, PMI Manufacturing Index, ISM Manufacturing Index, Construction Spending      

Friday: Employment Situation (jobs), International Trade, Factory Orders

No letup in earnings this week, with the final FAANGs (Facebook and Apple) on the way, along with lots of other high-profile tech, industrials, and energy. Some highlights:

Monday: First Data (FDC), ON Semiconductor (ON), Akamai Tech (AKAM), Cognex (CGNX), KLA-Tencor (KLAC), Mondelez International (MDLZ), Waste Connections (WCN)

Tuesday: Facebook (FB), eBay (EBAY), Amgen (AMGN), Aetna (AET), Coca-Cola (KO), Electronic Arts (EA), General Electric (GE), MasterCard (MA), Pfizer (PFE), Under Armour (UAA), Vulcan Materials (VMC), SendGrid (SEND)

Wednesday: ADP (ADP), Baxter (BAX), Exelon (EXC), General Motors (GM), International Game Tech (IGT), Kellogg (K), Yum! Brands (YUM), Allstate (ALL), American International (AIG), NXP Semi (NXPI), Qorvo (QRVO), Scientific Games (SGMS)

Thursday: Apple (AAPL), Arista Networks (ANET), EPAM Systems (EPAM), Spotify (SPOT), Symantec (SYMC), Yelp (YELP), CIGNA (CI), DowDuPont (DWDP), Marathon Petroleum (MPC), Royal Dutch Shell (RDS.A), Teva Pharma (TEVA), CBS (CBS), Kraft Heinz (KHC), Starbucks (SBUX), U.S. Steel (X), Wynn Resorts (WYNN)

Friday: AbbVie (ABBV), Alibaba (BABA), Cboe Global Markets (CBOE), Chevron (CVX), Exxon Mobil (XOM), Seagate Tech (STX)

Expiring futures contracts this week include:

●Monday: November natural gas (NGX8), October gold (GCZ8), October copper (HGV8), October platinum (PLV8)

●Wednesday: December Brent crude oil (BRZ8), November RBOB gasoline (RBX8), October 30-Day Fed funds (ZQV8), October live cattle (LEV8)

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 each day.

Bring on November. There’s still a couple days left in the month, but if October had ended on Friday, the SPX would have closed out with an 8.8% loss—the biggest October decline since 2008 and the third-biggest of the past 50 years.

But October losses don’t always portend bad Novembers. Of the five largest October SPX declines—1977, 1978, 1979, 1987, 2008—only two, 1987 and 2008, were followed by down Novembers. Look for more details about November stock market patterns in Tuesday’s Active Trader commentary.

 

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1 CNN.com. Tesla scores a profit, and Elon Musk keeps a promise. 10/24/18.

2 Bloomberg.com. Oil Tumbles 4% as Saudis Pledge to Produce as Much as They Can. 10/23/18.