Stocks hit a wall

●SPX posts fourth down week in the past five

●China slowdown ends week on a bearish note


Last week was sort of a good news, bad news situation for the market—as in, good news one minute, bad the next.

US stocks may have looked like they wanted to turn Monday’s early-session low into a more significant bottom, but repeated rally attempts throughout the week fizzled, leaving the market on Friday back where it started—near the support level represented by its recent lows.

Early in the week especially, the ebbs and flows of the price action often appeared to be tracking the ups and downs of the US-China trade situation, sometimes with dramatic swings in the same day.

Some highlights: After opening at its lowest point since early April, the S&P 500 (SPX) rallied to close in the green on Monday, and opened up 1% higher on Tuesday on news that China was considering cutting tariffs on US cars.1 But the index reversed to close slightly lower on the day amid President Trump’s threats to shut down the government if he doesn’t receive border wall funding from congress.2

S&P 500 (SPX), 10/17/18–12/14/18. S&P 500 (SPX) price chart. Hovering near support

Source: Power E*TRADE

More positive trade chatter on Wednesday initially drove the SPX as much as 1.85% higher, but bullish momentum again evaporated in the afternoon and the index closed up only 0.54%. On Thursday, the border wall/government shutdown story recaptured the spotlight, and on Friday shaky numbers out of China helped reignite global economy slowdown jitters.3

Net result: the S&P’s second-straight down week, and fourth out of the past five. Tech stocks held up the best, while small caps continued to underperform. Here’s the rundown:

US stock index performance table for week ending 12/4/18.

Source: Power E*TRADE

Sector action: The top-performing S&P 500 sectors were utilities (+0.6%), communications services (+0.5%), and information technology (+0.1%). The worst-performing sectors were financials (-3.6%), energy (-3.3%), and health care (-1.9%).

Highlight reel: Canadian cannabis firm Tilray (TLRY) shed 25% in the first four days of last week, falling to its lowest level ($75.52) since September 2017. XPO Logistics (XPO) tumbled 26% on Thursday, but then turned around and rallied 16% on Friday. Hotel operator Belmond (BEL) jumped 40% on Friday upon news of its sale to luxury brands company LVMH.

Futures watch: Well, at least crude oil has plugged the leak for the time being, even if it hasn’t rebounded. January WTI crude oil futures (CLF9) continued to consolidate last week, but ended the week with a nearly 2.7% on loss on Friday to end that dropped prices close to $51/barrel.

The week ahead

The last full week before the meat of the holiday season is a busy one: Quadruple witching expiration (stocks, stock options, stock index futures, single stock futures), housing numbers, leading indicators, GDP—all sandwiching Wednesday’s Fed interest rate announcement.

Monday: Housing Market Index    

Tuesday: Housing Starts (FOMC meeting starts)     

Wednesday: Current Account, Existing Home Sales, FOMC Meeting Announcement

Thursday: Leading Indicators

Friday: Quadruple Witching expiration, Durable Goods Orders, GDP, Corporate Profits, Personal Income and Outlays, Consumer Sentiment

Earnings this week include:

Monday: HEICO (HEI), Oracle (ORCL), Red Hat (RHT)

Tuesday: Carnival (CCL), Darden Restaurants (DRI), FedEx (FDX), Jabil (JBL), Micron (MU)            

Wednesday: General Mills (GIS), Paychex (PAYX)  

Thursday: Accenture (ACN), Conagra (CAG), Walgreens Boots Alliance (WBA), Cintas (CTAS), NIKE (NKE)

Friday: CarMax (KMX)

Go to the E*TRADE market calendar (logon required) for an up-to-date earnings schedule, along with a complete list of splits, dividends, IPOs, economic reports, and other market events. The Active Trader Commentary also lists earnings announcements and economic report times every day.

A downer of a December: Halfway through December, the market is down on the month. That’s not unheard of, even for a historically bullish month—the DJIA lost ground in December in both 2014 and 2015, after all. But if the Dow is below 25,538.46 on December 31, this will be the first time since 2008—and only the second time since 1941—that October, November, and December have all closed lower.

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1 China Moves on U.S. Car Tariff Cut Trump Tweeted About. 12/12/18.

2 Trump Stages Shutdown Confrontation With Democrats Over Wall. 12/12/18.

3 Dow drops 450 points amid rising fears over global growth. 12/14/18.