Market ends Q1 with a bang

If you hadn’t noticed, this is a trader’s market. Up, down, up—the roller coaster has continued, and technology shares have been greasing the rails. Make sure you’re securely buckled in.

Despite a rally on the last trading day of March, the blows taken by some of tech’s heavy hitters over the past couple of weeks helped weigh down a nervous US stock market and close out the first quarter of 2018 in the red.

But not too far in the red, and not entirely. Tech may have had the roughest ride lately, but thanks to its booming performance early in the year, as of Thursday the Nasdaq 100 (NDX) was still in the black for Q1—and the small-cap Russell 2000 (RUT) just missed squeaking into the plus column on Thursday. The following chart shows the relative performance through the end of Q1 for the NDX, RUT, S&P 500 (SPX), and Dow Jones Industrial Average (DJIA).

US stock index Q1 performance, 1/1/17 – 3/29/18

Source: OptionsHouse

Thursday’s strong rally may have saved the SPX from a third consecutive down week after the index fell to its lowest level of the week on Wednesday. Several big-name tech stocks that had been leading the market lower, including Facebook (FB), Tesla (TSLA), Oracle (ORCL), and Netflix (NFLX), appeared to find some footing and reversed off their lows to knock out gains. (FB jumped more than 4% on Thursday; TSLA more than 3%.) 

There’s been no shortage of price action. Dating back to March 22, the SPX’s daily close-to-close moves have been -2.5%, -2.1%, +2.7%, -1.7%, -0.03%, and +1.4%—that’s the kind of volatility that can churn the stomach of some investors, but present opportunities for fleet-footed traders. Last Tuesday the SPX fell nearly 3% from its intraday high and on Wednesday came within 60 points of matching its February correction low:

S&P 500 (SPX) 12/27/17 – 3/29/18. S&P 500 daily price chart

Source: OptionsHouse

But just when things were looking really shaky, the NDX racked up a 1.9% gain on Thursday and the Dow registered a market-leading 2.4% gain for the week. Here’s the breakdown for US indexes:
Index Comparison. US stock index comparison, week ending March 29, 2018

Source: OptionsHouse

The S&P 500 sector rotation noted the past few weeks in this space continued, with the classically defensive Consumer Staples (+2.2%) topping the market last week, followed by Real Estate (+1.6%) and still-strong Utilities (+1.5%). The worst-performing sectors last week were Information Technology (-1%, dramatically paring the previous week’s losses), Consumer Discretionary (-0.9%), and Materials (-0.5%).

Last week, tech’s challenges effectively drowned out what was a fairly solid week of economic data, including a better-than-expected GDP reading (+2.9%) and some strong housing numbers. This week starts with a bang—manufacturing and construction numbers today—and closes out with the jobs report on Friday:

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

Tuesday: Motor Vehicle Sales 

Wednesday: ADP Employment Report, Factory Orders, ISM Non-Manufacturing Index

Thursday: International Trade

Friday: Employment Situation, Consumer Credit

Not much on the docket in terms of earnings, but here are a handful to watch:

Monday: Cal-Maine Foods (CALM)

Tuesday: International Speedway (ISCA), Cloudera (CLDR), Dave & Busters (PLAY)

Wednesday: Acuity Brands (AYI), CarMax (KMX), Conn's (CONN), Lennar (LEN),

 Monsanto (MON), Ollie's Bargain Outlet (OLLI)

Thursday: Greenbrier (GBX), Lamb Weston (LW), RPM Inc. (RPM), Schnitzer Steel (SCHN), WD-40 (WDFC), Yum China (YUMC)

You can find a complete list of earnings and other market events on the E*TRADE market calendar (login required).

With Friday’s higher low and close, the S&P 500 has established a swing low on the weekly and daily charts represented by the March 23 low of 2585.95. The near-term drama could likely revolve around the market’s ability to avoid dropping below this level, which would set up a test of the February correction low.


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