In a week with a little bit of everything—courtroom drama, political skirmishes, new shots fired in the tariff war, and the release of Fed minutes—US stocks established some new milestones and headed into the last week of August on an up note.
After making a new intraday record high of 2873.23 on Tuesday, the S&P 500 (SPX) doubled down on Friday with a new all-time high (2876.16) and record close (2874.69), finally leaving its January 26 peak in the rear-view mirror. Wednesday also marked (by some measures) the longest bull market in history for the SPX—its longest stretch (3,453 days) without a 20% decline while also at least 20% above a previous low.1
But while most people were busy watching the SPX, the small-cap Russell 2000 (RUT) put up much bigger numbers on the week, breaking out definitively to new highs on Wednesday and tacking on another record on Friday.
For the most part, the market seemed to take most of the week’s potential obstacles (convictions of President Trump’s associates Michael Cohen and Paul Manafort, increased tariffs, the specter of higher interest rates, presidential pressure on the Fed and Attorney General) in stride. The minutes from the Federal Reserve’s July 31–August 1 meeting released on Wednesday, for example, suggested the central bank was still on course to raise interest rates two more times this year—a sentiment reiterated by Fed chairman Jerome Powell on Friday at the Jackson Hole Economic Symposium.2 Nonetheless, the SPX closed down only 0.04% on Wednesday and 0.17% lower on Thursday.
Here’s how the major US indexes stacked up for the week:
Source: OptionsHouse (data)
Sector action: The market’s push last week was accompanied by some rotation away from the recent status quo. The top-performing S&P 500 sectors were energy (+2.6), consumer discretionary (+2%), and information technology (+1.7%). The worst-performing sectors were consumer staples (-1.8%), utilities (-1.4%), and real estate (-1.1%).
Highlight reel: Cancer diagnostics stock Exact Sciences (EXAS) leaped 44% on Wednesday–Thursday after announcing a partnership with Pfizer (PFE). Chinese e-commerce colossus Alibaba (BABA) went on a wild ride Thursday after its earnings release, putting up the biggest daily range ($14.59) in its history. The stock initially jumped nearly 5% to $186.50 before retreating to close down a little more than 3% at $172.23.
The energy sector’s strength last week came courtesy of a strong rebound in crude oil prices. October WTI crude oil futures (CLV8) gained ground every day but Thursday, rallying more than $4 to top $69/barrel—their highest level since July 11. Gold also got back into the plus column, with the December futures contract (GCZ8) closing above $1,200/ounce on Friday and finishing off its biggest seven-day gain since April.
The week ahead. This week traders have GDP to look forward to, along with the last housing numbers of the month:
●Monday: Chicago Fed National Activity Index
●Tuesday: International Trade in Goods, Retail Inventories (advance), Wholesale Inventories (advance), S&P Corelogic Case-Shiller HPI, Consumer Confidence
●Wednesday: GDP, Corporate Profits, Pending Home Sales Index
●Thursday: Personal Income and Outlays
●Friday: Consumer Sentiment
More retail stocks highlight this week’s earnings calendar:
●Monday: Heico (HEI)
●Tuesday: Best Buy (BBY), DSW (DSW), Tiffany & Co. (TIF), H&R Block (HRB), Hewlett Packard Enterprise (HPE)
●Wednesday: American Eagle (AEO), Dick's Sporting Goods (DKS), PVH (PVH), Salesforce (CRM)
●Thursday: Burlington Stores (BURL), Campbell Soup (CPB), Ciena (CIEN), Dollar General (DG), Dollar Tree (DLTR), Michaels Stores (MIK), Sears Holdings (SHLD)
●Friday: Big Lots (BIG)
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.
The summer doldrums that weren’t. August still has five days to go, but if the month had ended last Friday, the SPX’s 2%-plus gain would be around twice the size of its median August gain since 1960.
1 The Wall Street Journal. S&P 500 Tiptoes to New Bull Market Record—Sort Of. 8/22/18.
2 Bloomberg. Fed Chairman Powell Says Gradual Hikes Likely Needed If Economy Stays Healthy. 8/24/18.