Market seeks rebound
07/02/18
The US stock market starts the second half of the year in a position to build on a potential reversal of its recent pullback, as a Thursday-Friday rally pushed the S&P 500 (SPX) off its lowest level since late May.
S&P 500 (SPX), 1/17/18 – 6/29/18. S&P 500 (SPX) price chart. Pullback and rebound. Attempting another bounce.

Source: OptionsHouse

A week that started off badly didn’t get much better until Thursday, when the SPX again returned to the midpoint of the range defined by its January high and February low, but then rallied intraday to close in the green. And despite a late-afternoon slide on Friday, the SPX managed to post another up close and put together its best two-day return since June 7.

Although tech and small-caps pulled back the most last week, they still lead the broad market by a wide margin year to date. Also, the Dow Jones Industrial Average (DJIA) got a reprieve from its recent underperformance by holding up the best under last week’s pressure. Here’s the index breakdown for last week:

Index comparison table for week ending June 29, 2018. S&P 500, Nasdaq 100, Russell 2000, Dow Jones Industrial Average.

Source: OptionsHouse (data)

Utilities (+2.5) held the top spot among S&P 500 sectors, followed by Telecom Services (+1.5%), and Real Estate (+1.4%). The worst-performing sectors were Information Technology (-1.8%), Consumer Discretionary (-1.5%), and Financials (-1.4%).

Some notable individual stock moves were fueled by potential takeover news, as well as worries that a certain company may dominate an entire industry. Campbell Soup (CPB) bucked last Monday’s broad-market sell-off with a 10% rally amid reports of a possible buyout by Kraft Heinz (KHC), while Amazon’s acquisition of prescription delivery company PillPack pummeled shares of pharmacy, drug, and even some insurance providers on Thursday. Walgreens Boots Alliance (WBA) fell more than 9% but stabilized on Friday to close higher.

In futures, August WTI crude oil (CLQ8) closed higher every day last week except Monday, pushing to new contract highs above $74/barrel and extending the rally that began in the wake of the previous week’s announcement of an OPEC production increase. August gold futures (GCQ8) fell to a nearly one-year low, dropping below $1,250/ounce on Thursday and Friday.

The week ahead: It’s a short week—no equity trading on July 4, and an early close on July 3 (futures trading sessions vary)—but there are some big reports coming out, including Fed minutes on Thursday and jobs on Friday:

Monday: PMI Manufacturing Index, ISM Manufacturing Index, Construction Spending

Tuesday: Factory Orders; US equities close early.

Wednesday: July 4th holiday; US equity markets closed, trading until noon CT in select financial futures.

Thursday: ADP Employment Report, PMI Services Index, ISM Non-Manufacturing Index,

FOMC Minutes

Friday: Employment Situation, International Trade

Most companies seem to be observing the Independence Day holiday, as only a handful of earnings are on tap:

Monday: Herman Miller (MLHR)

Tuesday: Acuity Brands (AYI)

Thursday: PriceSmart (PSMT), International Speedway (ISCA)

Go to the E*TRADE market calendar (logon required) for an up-to-date schedule, along with a complete list of splits, dividends, IPOs, and other market events.

July seasonal tendencies. There are a couple of calendar patterns for stock traders to consider as we kick off July. Since 1960, the S&P 500 has closed up the first trading day of July (today) 72.4% of the time. Also, the Fourth of July holiday is Wednesday. Since 1960 the S&P has shown a tendency to close higher the day before the holiday (up 62% of the time) and close down the day after it (down 57% of the time).

Overall, July has been a fairly bullish month for US equities. The Dow has posted a gain for the month 63.33% of the time since 1928, and 70% of the time since 1988.

 

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