S&P 500 plods to new highs after Memorial Day
06/05/17

Traders have a maxim to never short a dull market. Last week showed why.

Price action, after all, was pretty dull. There was good news, and there was bad news. The market responded by plodding lazily into record territory. Some chart geeks triumphantly proclaimed a breakout, but for most it felt like Memorial Day break never ended. All told, the S&P 500 squeezed out a 0.9 percent gain in the holiday-shortened week between May 26 and June 2. 

ADP’s private-sector payrolls report and the Supply Management’s manufacturing index beat economists’ forecasts, while non-farm payrolls, construction spending, and jobless claims missed. That combination of “good news” and “bad news” reminded some investors of Goldilocks because conditions were neither too hot, nor too cold, but just right. 

There were some signs of rotation between sectors as investors turned away from established leaders in the technology space in favor of health-care and utility stocks. They also hitched a ride on transportation stocks, which shifted into gear after three months of underperformance. 

Traders looking for excitement on an individual-stock level were also jilted. Not only did they struggle to find double-digit movers, but the few names that did stand out were pretty darn obscure. Medical-device maker Cooper (NYSE: COO) was the only member of the S&P 500 to climb 10 percent. Discount retailer Dollar General (NYSE: DG) came in second place with a 9 percent gain.

S&P 500 6-month chart

Source: OptionsHouse by E*TRADE

Michael Kors (NASDAQ: KORS) led to the downside, falling 10 percent on the heels of weak results.1 Range Resources (NYSE: RRC) followed with an 8 percent decline.

For another example of “the more things change, the more they stay the same”, energy kept bleeding lower as the world remains awash in oil. It’s the only major sector that’s red on a year-to-date basis, down 14 percent.

On a brighter note, global stocks continued to advance as positive economic reports flowed in from Italy, France, and South Korea. Even former problem-spots like Greece and Portugal joined the happy-news camp.2

There’re likely to be more headlines overseas this week – especially on Thursday. That’s when the European Central Bank announces monetary policy and voters in Britain head to the polls. Other items include ISM’s service-sector index and factory orders today, followed by oil inventories on Wednesday and jobless claims Thursday.

Bottom line: Last week was quiet but money kept flowing into stocks.

 

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1. Reuters: Michael Kors slumps on weak forecast; to shut over 100 stores. 5/31/17.

2. Bloomberg: Italy Unemployment Rate Fell to Almost 5-Year Low in April. 5/31/17. Financial Times: French GDP growth upgraded to 0.4% in Q1. 5/30/17. The Business Times (Singapore): South Korea Q1 GDP growth revised up to 1.1% q-o-q on construction boost. 6/2/17. Greek Reporter: Greek GDP Revised Upwards to +0.4% in Q1. 6/2/17. RTTNews: Portugal Consumer Confidence At Record High. 5/30/17.