S&P 500 bounces as traders buy the pullback

The S&P 500 had its biggest pullback of the year last week, and buyers jumped in.

The index rose 0.8 percent between Friday, March 24, and Friday, March 31. It followed a sharp drop the previous week that brought the index to its 50-day moving average for the first time since November. That’s the kind of opportunity traders hate to miss.

Energy led the bounce as strong economic data and production cuts by OPEC restored confidence in crude oil.1 Consumer-discretionary stocks were also strong as investors bottom-fished beaten-down retailers, and financials showed signs of resuming their longer-term uptrends ahead of quarterly earnings.

Economic news likely helped spur the gains. Consumer confidence unexpectedly shot to its highest levels since late 2000 as Americans gushed enthusiastically about business conditions, jobs, and their own personal outlooks.2 The Commerce Department did a mulligan on its earlier read of fourth-quarter GDP, boosting the score from growth of 1.9 percent to 2.1 percent.3 A pair of housing reports also had their best showings in over a year.4

S&P 500 6-month chart

Source: OptionsHouse by E*TRADE

Vertex Pharmaceuticals (NASDAQ: VRTX) was the S&P 500’s biggest winner last week, rallying 22 percent thanks to positive results for its cystic fibrosis treatment. Chemical stock FMC (NYSE: FMC) followed, up 14 percent, amid news it would buy DuPont’s (NYSE: DD) crop-protection business.

Akamai Technologies (NASDAQ: AKAM) led to the downside with a 6 percent drop, while Mylan (NYSE: MYL) slid 5 percent, and Paychex (NASDAQ: PAYX) dropped 4 percent.

The S&P also eked out its best quarterly performance since the last three months of 2015. Most of this year’s appreciation, however, came during February, and the index remains trapped below its all-time high of 2401 on the first session of March.

Attention will likely turn to key economic data this week, spearheaded by the Institute for Supply Management’s Manufacturing Index later this morning. ADP’s private-sector payrolls report and minutes from the last Federal Reserve meeting follow on Wednesday, and the Labor Department’s employment numbers are due Friday. 

In summary, the S&P 500 gave traders a chance to buy the pullback last week, and they didn’t miss it.

1. Reuters: OPEC compliance with oil curbs rises in March as UAE joins cut: survey, 3/29/17.

2. The Conference Board: Consumer Confidence Survey, 3/28/17

3. RTT News: U.S. GDP Growth Upwardly Revised More Than Expected in Q4, 3/30/17

4. CNBC.com: US home prices rise 5.9 percent to 31-month high in Jan: S&P CoreLogic Case-Shiller, 3/28/17; CNBC.com: Pending home sales see warm spring surge, up 5.5%, 3/29/17.