Stocks weather the weather
09/17/18

●Market posts gain as hurricane hits East Coast

●Tech led, small-caps lagged

●New week closes out with quadruple-witching Friday


 

With baseball playoffs approaching, and football underway, it’s worth remembering a win is a win.

Reversing an early-September pullback, US stocks got back into the plus column last week, with the S&P 500 (SPX) banging out five consecutive higher highs and higher closes despite the distraction of some end-of-week tariff news.

S&P 500 (SPX), 6/28/18–9/14/18. S&P 500 (SPX) daily price chart. Pullback.

Source: OptionsHouse


But in the absence of market-shaking economic data for most of the week—retail sales were weaker than expected, but inflation was non-existent and industrial production, business inventories, and consumer sentiment were solid to strong—weather dominated the headlines: Hurricane Florence, which made landfall on the East Coast on Thursday, juiced up certain pockets of the stock market, and stirred things up a bit in crude oil, too.

In the prelude to the storm reaching the Carolinas, insurance stocks pulled back while others, including home improvement and repair stocks Home Depot (HD), Lowe’s (LOW) and Beacon Roofing Supply (BECN), popped on expectation of sales boosts. On Thursday, though, both groups reversed direction, and some insurers followed through strongly to the upside on Friday.

Stocks were cruising quietly higher on Friday when reports surfaced around noon ET that the White House wanted to move forward with tariffs on an additional $200 million in Chinese goods. The SPX dropped 0.32% over the next 25 minutes, and the Dow Jones Industrial Average (DJIA) pulled back more than 100 points. But both indexes ultimately rebounded to close slightly up on the day. 

Overall, tech led the market to the upside, while small-caps brought up the rear. Here’s where things stood at the end of the week:

US stock index performance table for week ending 9/14/18

Source: OptionsHouse (data)


Sector action: The top-performing S&P 500 sectors were telecom services (+2.9%), energy (+2.1%), and industrials (+1.9%). The worst-performing sectors were financials (-0.4%), real estate (+0.2%), and utilities (+0.4%).

Highlight reel: Nike (NKE) hit a new all-time high of $83.90 on Thursday, just seven trading days after its September 4 downturn amid the Colin Kaepernick ad controversy.

Kroger (KR)—fresh off a record high five days earlier—took a 10% hit on Thursday after releasing  disappointing quarterly sales.1

Canadian medical marijuana company Tilray (TLRY) went, in a word, ballistic—gaining 63% Monday through Thursday (hitting $127.27) and extending its gain since its July 19 IPO to 467%. The stock then tumbled 19% intraday on Friday before ending the day down 9%.

Futures action: November WTI crude oil futures (CLX8) popped back to nearly $71/barrel last Wednesday amid Hurricane Florence’s approach—again tagging the resistance level noted in “Eye of the market hurricane”—before dropping more than 2% on Thursday and ending the week below $69. (By the way, the US recently reclaimed its title as the world’s top crude oil producer for the first time since the early 1970s.2)

The week ahead

In addition to “quadruple witching” on Friday (stock options, index options, index futures, and single-stock futures all expire), this week will bring the month’s first housing numbers, along with some international inflation numbers:

Monday: Empire State Manufacturing Survey  

Tuesday: Housing Market Index, Bank of Japan Announcement                             

Wednesday: Housing Starts, Current Account, Great Britain CPI and PPI

Thursday: Existing Home Sales, Leading Indicators

Friday: Quadruple Witching, Canadian CPI and Retail Sales

And a few earnings on tap:          

Monday: FedEx (FDX), Oracle (ORCL)   

Tuesday: AutoZone (AZO), Cracker Barrel (CBRL), General Mills (GIS)

Wednesday: USA Tech (USAT), Copart (CPRT), Red Hat (RHT)                

Thursday: Darden Restaurants (DRI), Lennar (LEN), Thor Industries (THO), Micron (MU)       

Also, most September currency futures contracts expire today, and October WTI crude oil futures (CLX8) expire on Thursday.

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 back nine (or 10). This week kicks off the second half of September, which has had a modestly bearish history for the SPX over the past 55 years—more a function of down days simply outnumbering up days than a case of recurring large calamities.

Although the market has bucked most of its historical calendar trends this summer, for the record, the 15th, 16th, and 20th trading days of the month—that’s Friday, September 21, Monday, September 24, and Friday, September 28 this year—have been, on average, the most bearish days since 1964. The 16th day of the month has closed down 63% of the time overall, and nine times in the past 10 years.

 

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1 Bloomberg.com. Trump Wants $200 Billion in China Tariffs Despite Talks, Sources Say. 9/14/18.

2 CNBC.com Kroger shares crash as sales disappoint. 9/13/18.

3 CNN.com. America is now the world's largest oil producer. 9/12/14.