●First up week for all major US stock benchmarks since September 14
●Indexes back in black for year; small-cap stocks lead
●This week: Election Tuesday, Fed meeting, inflation data
Maybe it’s a good thing the weekend arrived when it did—traders may have needed a breather.
After breaking to a nearly six-month low to start last week, the S&P 500 (SPX) rattled off three straight days of gains, then hit an eight-day high early Friday before turning lower and bookending the week with another down day. Nonetheless, when the smoke cleared it was the first week since September 14 that all major US stock indexes notched gains.
The SPX rallied nearly 6% off last Monday’s low of 2,603.54—its lowest level since May 3—and pushed to its highest since October 22 early Friday before sagging (chart above). Overall, it was the market’s best week since March 9.
Also notable: Small-cap stocks rose from the ashes of their correction, with the Russell 2000 (RUT) leading all US indexes and putting up its best week since February 16, closing higher on Friday, and getting back into the black for the year (by a hair). The final scorecard:
Source: OptionsHouse (data)
Sector action: Reflecting the bullish change in tenor, investors played more offense than defense at the sector level last week. Materials (+5.7%), financials (+4.0%), and consumer discretionary (+3.8%) were the strongest S&P 500 sectors, while utilities (-0.9%), real estate (-4.3%), and information technology (+0.8%) lagged the field.
Highlight reel: One of the big moves not tied to an earnings release this week was Redhat’s (RHT) 50% interstellar leap on Monday on news IBM (IBM) was shelling out $34 billion to buy the company best known for the Linux operating system.
Kellogg (K) tumbled 8.9% post-earnings on Wednesday, then tacked on additional losses Thursday and Friday. Aerojet Rocketdyne (AJRD) lived up to its name with a 17% moonshot Wednesday, followed by two more days of gains and a record high on Friday.
Rounding out the week, Apple (AAPL) beat earnings and revenue estimates, but appeared to rattle the market with a tepid outlook for the holiday season and an announcement that it would stop reporting certain sales numbers for its marquee products.1 The stock sank more than 7% in Friday’s session, putting a bearish squeeze on the DJIA and, especially, the NDX.
Futures watch: December WTI crude oil futures (CLZ8) continued their slide, falling below $63/barrel to their lowest level since mid-June.
After turning lower early last week and breaking out of the downside of a two-week trading range, December gold futures (GCZ8) turned back to the upside on Thursday and closed out the week around $1,235/ounce.
The week ahead
It should be interesting. It’s possible the markets may hold their collective breath a bit until the outcome of Tuesday’s mid-term elections, but in addition to that potential market mover, there’s a Wednesday-Thursday Fed meeting (although December is the big one), as well as assorted inflation data and service industry stats throughout the week:
●Monday: PMI Services Index, ISM Non-Manufacturing Index; Australia RBA Announcement
●Tuesday: (Election Day) JOLTS; European Union PPI.
●Wednesday: FOMC Meeting Begins, EIA Petroleum Status Report; Germany Industrial Production
●Thursday: FOMC meeting announcement
●Friday: Producer Price Index (PPI), Consumer Sentiment, Wholesale Trade
There will still be lots of earnings flooding in this week. Here’s a taste:
●Monday: PG&E (PCG), Sysco (SYY), Booking Holdings (BKNG), International Flavors (IFF), Marriott (MAR), Mosaic (MOS), Occidental Petro (OXY)
●Tuesday: Archer-Daniels (ADM), CVS Health (CVS), Eli Lilly (LLY), LGI Homes (LGIH), SAGE Therapeutics (SAGE), US Foods (USFD), Etsy (ETSY), GoDaddy (GDDY), Match Group (MTCH), Scientific Games (SGMS), SendGrid (SEND), Twilio (TWLO)
●Wednesday: Autohome (ATHM), Humana (HUM), Michael Kors (KORS), Rockwell Automation (ROK), SodaStream (SODA), Weibo (WB), Albemarle (ALB), Fossil (FOSL), Marathon Oil (MRO), Microchip (MCHP), Qualcomm (QCOM), Roku (ROKU), Square (SQ), Take-Two (TTWO), TripAdvisor (TRIP)
●Thursday: AstraZeneca (AZN), Brookfield Asset Management (BAM), Cardinal Health (CAH), CenterPoint (CNP), DR Horton (DHI), Johnson Controls (JCI), Scientific Games (SGMS), Worldpay (WP), 58.com (WUBA), Activision Blizzard (ATVI), CRISPR Therapeutics (CRSP), Dropbox (DBX), Walt Disney (DIS), Yelp (YELP)
●Friday: Adient (ADNT), Starwood Property Trust (STWD), Tribune Media (TRCO), athenaHealth (ATHN)
And for you orange juice futures traders, don’t forget the November contract (OJX8) expires this Friday.
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.
Good jobs, bad jobs. Friday’s jobs report showed 250,000 new jobs were created—far above estimates—while unemployment held steady at 3.7% and wages increased the most they have since 2009.2
The strength of the report may be something of a mixed blessing for the market, though, because while it suggests economic strength, it also increases the odds the Federal Reserve will increase interest rates again in December.
Let’s see how the combating sentiments play out this week.
1 CNBC.com. Apple plunges into correction territory after shaking up its quarterly reporting structure. 11/2/18.
2 Bloomberg.com. U.S. Payrolls Rise More Than Forecast as Wage Gains Hit 3.1%. 11/2/18.