Market takes its swings

If Apple (AAPL) was a baseball player, last week it was the designated hitter in a clutch game—a big bat that comes through with a big hit when it counts most. More on that later.

As the first full week of August gets underway, the US equity market finds itself continuing to trade near multi-months highs and the S&P 500 (SPX) again positioning itself to challenge its record peak after pulling back early last week.

The week’s earnings releases—mostly good—did battle with trade wars, an FOMC interest rate announcement (no change, as expected), and a mixed jobs report (unemployment rate down, but fewer new jobs than expected). The result was a back-and-forth affair that ended up in the plus column, with tech stocks pulling back sharply on Monday, but then rebounding to keep the Nasdaq 100’s (NDX) uptrend intact and give it the biggest gain of all US indexes for the week (see “It’s all relative—strength, that is”).

S&P 500 (SPX), 6/21/18 – 8/3/18. S&P 500 (SPX) daily price chart. Thursday turnaround.

Source: OptionsHouse

Most of last week represented something of a consolidation for the SPX, after the pullback that looked like it had ended on Monday was tested again in early trading on Thursday when the White House threatened additional tariffs on China (see “Tariff tantrums, trading ops?”). But the SPX rallied off its lows to make a higher high and higher close, and followed through with a solid gain on Friday.

The week also marked an extension of the small-cap Russell 2000’s recent underperformance. Here’s how the major US stock gauges fared:

Index comparison table for week ending August 3, 2018. S&P 500, Nasdaq 100, Russell 2000, Dow Jones Industrial Average.

Source: OptionsHouse (data)

The S&P 500 sector scorecard for last week reflected some rotation, with the previous week’s biggest loser, real estate (+3.3%), claiming the top spot, followed by telecom services (+2.2%) and health care (+2.1%). The worst-performing sectors were energy (-1.8%), industrials (-0.2%), and materials (-0.2%).

In terms of the week’s highlight reel, there may have been bigger individual stock moves than Apple’s (AAPL), but probably none as significant. The last tooth of the FAANG clan to report earnings arguably helped turn the tide on the initially wobbly week with its earnings beat after Tuesday’s close. Shares rallied 5.9% on Wednesday—giving a leg up to the NDX, which had fallen to a three-week low on Monday—and then tacked on a 3.4% intraday gain (to $208.38) on Thursday to make Apple the first US company with a $1 trillion market cap.

In the futures market, August gold (GCQ8) slipped to new contract lows around $1,205—the metal’s lowest price in more than a year—on Thursday and early Friday before rallying modestly to staunch the bleeding. Silver (SI) and copper (HG) futures also traded lower before paring their losses on the final day of the week. September WTI crude oil (CLU8) dropped to a nearly two-week low below $67 early Thursday before reversing intraday to close around $69, and ending the week with a small loss.

The week ahead. Aside from inflation data (CPI and PPI) on Thursday and Friday, and a full slate of US Treasury auctions, this week’s economic calendar is fairly light:

Monday: 3-month bill auction, 6-month bill auction

Tuesday: 4-week bill auction, 3-year T-note auction, Consumer Credit

Wednesday: 10-year T-note auction

Thursday: Producer Price Index (PPI), Wholesale Trade, 30-year T-bond auction

Friday: Consumer Price Index (CPI), Treasury Budget

Earnings reports scheduled for this week include:

Monday: Cardinal Health (CAH), Tyson Foods (TSN), Andeavor (ANDV), Etsy (ETSY), Howard Hughes (HHC), Luminex (LMNX), Marriott (MAR), Mosaic (MOS), Weight Watchers (WTW)

Tuesday: Bio-Techne (TECH), Eagle Pharma (EGRX), Emerson (EMR), Energen (EGN), LGI Homes (LGIH), National Health (NHI), SAGE Therapeutics (SAGE), Spark Therapeutics (ONCE), Albemarle (ALB), Bio-Rad Labs (BIO), Walt Disney (DIS)

Wednesday: Autohome (ATHM), Charles River (CRL), CVS Health (CVS), Keurig Dr Pepper (KDP), Michael Kors (KORS), Booking Holdings (BKNG), Murphy Oil (MUR), Netease (NTES), Occidental Petro (OXY), Sunoco LP (SUN), Yelp (YELP)

Thursday: Canada Goose (GOOS), CRISPR Therapeutics (CRSP), Dillard's (DDS), Viacom (VIAB), Worldpay (WP), Dropbox (DBX), News Corp. (NWSA), Paylocity (PCTY), Sunrun (RUN) Synaptics (SYNA), Uniti Group (UNIT)

Friday: Jagged Peak Energy (JAG)

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

Not a bad July, by any means. Last month turned out to be one of the better Julys on record for the S&P 500, which posted a 3.6% gain—the 15th strongest July since 1960. Only three other years in the past 20 (2013, 2010, and 2009) have topped it. One bit of information for traders to keep in mind, though: Of the seven other years since 1960 that the SPX gained 3%–4% in July, five of them (1973, 1992, 1995, 2005, and 2016) were followed by down Augusts.

But let's not get ahead of ourselves. Unlike investors, traders know to take the market as it comes.


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