Market plays the waiting game

●Stocks positioned to close out a strong February, small caps stayed hot

●Markets await outcome of trade negotiations

●Up this week: GDP, Trump-Kim meeting, Powell testimony


Let’s just call it nine straight weeks of gains, and a 1.000 batting average for 2019 as February transitions into March.

Because if you take away the S&P 500’s (SPX) -0.22% loss for the week ending January 25, the major US stock indexes have all ratcheted higher each week since December 28—and it’s been a clean sweep for the Nasdaq 100 (NDX), Russell 2000 (RUT), and the Dow Jones Industrial Average (DJIA).

Last week the SPX inched to its highest level since December 3 amid an as-expected FOMC minutes release, some weak housing numbers, and a lot of anticipation over the ongoing US-China trade negotiations:

S&P 500 (SPX), 11/29/18–2/22/19. S&P 500 (SPX) price chart. Up week, up month?

Source: Power E*TRADE

Wednesday’s FOMC minutes did little to push the market one way or the other. Stocks traded relatively quietly after the release, pulled back on Thursday, then rebounded on Friday. But price action may have been a bit tamped down during the holiday-shortened week because of the looming trade deadline, which remains this Friday.

One recent trend that continued was the small-cap hot streak, with the Russell 2000 (RUT) putting up the week’s biggest gain and getting close to an 18% gain on the year:

US stock index performance table for week ending 2/22/19. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE

Sector action: The top-performing S&P 500 sectors were materials (+2.14) sector, followed by utilities (+2.12%), and information technology (+1.2%). The worst-performing sectors were energy (-0.6%), health care (-0.5%), and real estate (-0.01%).

Highlight reel: Some of the biggest fireworks went off at the end of the week. On Friday, The Trade Desk (TTD) shot up 31% and Wayfair (W) jumped 28%, while Kraft Heinz (KHC) fell 27% and (STMP) tanked 58%.

A smaller move, but still interesting: Newmont Mining (NEM) rallied all week, then popped more than 5% intraday on Friday—amid news that Barrick Gold (GOLD) was considering a hostile takeover.1

Futures watch: April WTI crude futures (CLJ9) rallied close to $58/barrel on Friday—the highest they’ve been in more than three months—before pulling back to around $57.

After tagging $1,350 on Wednesday to make a 10-month high, April gold (GCJ9) turned lower to end the week around $1,331.

The range continues: Last Wednesday’s FOMC meeting didn’t do much to shake the Treasury tree, with March 10-year T-note futures (ZNH9) ending the week pretty much where they closed the previous one, around 122.

Coming this week

Besides the trade situation, there are plenty of potential market catalysts this week: President Trump is scheduled to meet with North Korean leader Kim Jong Un, Fed Chairman Jerome Powell will testify before Congress, there’s another potential Brexit vote, and the possible release of Robert Mueller’s Russia investigation.

This week’s economic highlights include the final housing numbers of the month, GDP, manufacturing data, and European employment data:                                                                  

Monday: Chicago Fed National Activity Index, Wholesale Trade

Tuesday: Housing Starts, S&P Corelogic Case-Shiller HPI, FHFA House Price Index, Consumer Confidence

Wednesday: International Trade in Goods, Factory Orders, Retail Inventories, Wholesale Inventories, Pending Home Sales Index

Thursday: GDP, Powell congressional testimony Day 1

Friday: Germany Unemployment Rate, European Union Unemployment Rate, Personal Income and Outlays, PMI Manufacturing Index, ISM Manufacturing Index, Consumer Sentiment, GDP, Powell congressional testimony Day 2

Check out all the high-profile, high-volume, and high-momentum stocks releasing earnings this week, including retail, homebuilders, energy, and tech, and bio pharma:

Monday: 2U (TWOU), Etsy (ETSY), Immunomedics (IMMU), KBR (KBR), Mosaic (MOS), Tenet Healthcare (THC), Terex (TEX)

Tuesday: AutoZone (AZO), Cheniere Energy (LNG), Home Depot (HD), J.M. Smucker (SJM), LGI Homes (LGIH), Macy's (M), TRI Pointe Homes (TPH), Worldpay (WP),   GW Pharma (GWPH), Palo Alto Networks (PANW), Toll Brothers (TOL), Weight Watchers (WTW)

Wednesday: AES (AES), Amarin (AMRN), Best Buy (BBY), Campbell Soup (CPB), Lowe's (LOW), Weibo (WB), Apache (APA), HP (HPQ), L Brands (LB), Square (SQ), Teladoc (TDOC)

Thursday: CenterPoint (CNP), Crocs (CROX), Dillard's (DDS), Intercept Pharma (ICPT), (JD), Keurig Dr Pepper (KDP), LKQ (LKQ), NRG Energy (NRG), Autodesk (ADSK), Dell (DELL), Gap (GPS), Live Nation (LYV), Marriott (MAR), Nektar Therapeutics (NKTR), Nordstrom (JWN), Splunk (SPLK), VMware (VMW), Workday (WDAY)

Friday: Colony Capital (CLNY), Dentsply Sirona (XRAY), Foot Locker (FL), Portola Pharma (PTLA), TEGNA (TGNA)

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 and economic report times every morning.

Changing of the monthly guard. Friday is March 1, which means that unless the market pulls back fairly sharply in the next few days, this month stands a good chance of going down as a pretty good February—part of a recent trend that marks a major departure from longer-term norms.

The second month of the year has historically been one of the weaker months of the year for the S&P 500. From 1960 to 2018, February has closed higher 52.5% of the time had a 0.59% median return (fifth worst of all months). For the first 50 of those years (through 2009), February was the SPX’s second-worst month (after September), up only 48% of the time and posting a -0.13% median return.

Since then, though, February has been, hands down, the strongest month for the SPX, with a median return of 3.2%. If this February holds on to its current gains, it would (coincidentally) end with a 3.2% return, making it one of the 15 strongest Februaries since 1960. And it’s had plenty of company recently: Seven of the past nine Februaries have closed up, and six of those are on the February top-15 list.

If this month simply ends up in the plus column, it will mean eight of the past 10 Februaries have closed higher—something that’s never happened since 1960.


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1 Newmont Mining Surges Amid Reports Barrick Gold Considering $19 Billion Takeover. 2/25/19.