A boring week? Not so fast.
09/25/17

Appearances can be deceiving. Just look at the market last week.

Things were calm on the surface, with the S&P 500 rising less than 0.1 percent between Friday, September 15, and Friday, September 22. It also drifted a few points above the psychologically important 2500 level, but traders found plenty of excitement in other places.

First and foremost: Money kept streaming into financials. The sector was the top major group in the market with a gain of 2.7 percent, and closed at its highest level this decade. So long subprime-mortgage hangover, don’t let the door hit you on the way out.

Speaking of the 2008 financial crisis, the Fed will take another training wheel off the economy by unwinding nine years of quantitative easing.1 That was the second big change last week.

Next up was a spreading perception in the energy market that OPEC will extend oil-production cuts early next year.2 That helped lift crude oil to a six-month high and made energy the No. 2 sector with a two percent gain. Industrials were close behind.

Utilities, consumer staples, and REITs, however, weren’t so lucky and shed 2-3 percent each. After all, rising interest rates may be good for banks, but most will tell you they’re usually a bummer for dividend stocks.

Ditto for that matter when it comes to an improving economy… and last week’s data mostly painted a strong picture for growth both at home and abroad. Initial jobless claims were stunningly low, while leading indicators and the Philadelphia Fed’s regional index blew past estimates. Global inflation numbers suggested the deflation boogeyman is also in retreat.3 Don’t write, dude, we won’t miss you.

S&P 500, 3/29/17 - 9/22/17

Source: OptionsHouse by E*TRADE

What about tech? There was drama on that front as traders continued to sell Apple (NASDAQ: AAPL) on the heels of its new iPhone on September 12. Other darling megacaps like Facebook (NASDAQ: FB) and Amazon.com (NASDAQ: AMZN) bled lower as well, and have failed to make new highs since July. Given the strength in more cyclical sectors, traders may very well wonder if capital’s rotating away from higher-multiple tech names.

Equifax (NYSE: EFX) rebounded from its massive drop earlier in the month, advancing 13 percent on the week. That made it the best-performing member of the S&P 500.  Anadarko Petroleum (NYSE: APC) followed with a 12 percent gain amid plans to buy back $2.5 billion of stock. 

Foot Locker (NYSE: FL) and Mattel (NYSE: MAT) found themselves at the bottom of the list, down nine percent and eight percent respectively. Both are down big this year amid a general slaughter in traditional retailers.

This week’s calendar starts quiet today, but works up to a few important events. Consumer confidence and a speech by Fed chair Yellen get the ball rolling tomorrow. Micron Technology (NASDAQ: MU) and Nike (NYSE: NKE) announce results as well.

Wednesday brings durable-goods orders, pending home sales, and crude-oil inventories. The final revision of second-quarter gross domestic product, initial jobless claims, and Accenture (NYSE: ACN) earnings are due the next morning. Things wrap up Friday with personal income and spending, plus consumer sentiment. 

In addition to those events, health care is likely to be in focus as politicians take another stab at repealing the Affordable Care Act.

 

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1. CNBC: Fed approves October reversal of historic stimulus, leaves rates unchanged. 9/20/17.

2. Reuters: Oil up 2 percent despite U.S. crude build; set for best third quarter since 2004. 7/17/17.

3. RTT News: U.S. Import And Export Prices Climb More Than Expected In August. 9/19/17. Germany's Producer Price Inflation At 3-Month High. 9/20/17. RTT News: U.S. Weekly Jobless Claims Unexpectedly Drop To 259,000. 9/21/17. Marketwatch: Philly Fed manufacturing index accelerates in September. 9/21/17.