Stocks gain despite tech slip
- Up week for S&P 500, tech volatility weighs on Nasdaq
- Big banks (mostly) rally, NFLX and TSLA pull back
- This week: Fed rate decision, GDP, Big Tech earnings
Traders enter a key week of earnings and economic data with stocks coming off their eighth up week of the past 10, although tech-sector volatility cut into those gains on Thursday.
The S&P 500 (SPX) extended its recent breakout, hitting its highest high since April 5 last Wednesday before losing steam:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.) Note: It is not possible to directly invest in an index.
The headline: Broad market up in full week of earnings season.
The fine print: Big banks mostly rallied after announcing their numbers, but post-earnings declines in Netflix (NFLX) and Tesla (TSLA) last Thursday pulled down the market. The Nasdaq 100 (NDX) tech index fell more than 2.3%, more than three times as much as the SPX.
The number: 81%, the percentage of the January–October 2022 downtrend the S&P 500 (SPX) had retraced as of last Wednesday.
The move: Thursday’s retreat followed higher closes on Wednesday for both the SPX and the Cboe Volatility Index (VIX). It was the second time in less than a week that SPX-VIX up days were followed by down days.
The scorecard: The Dow paced the bulls, while the NDX was the only index to lose ground (although it’s still up more than 40% for the year):
Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Sector returns: The strongest S&P 500 sectors last week were energy (+3.6%), health care (+3.5%), and financials (+3%). The weakest sectors were communication services (-3%), consumer discretionary (-2.3%), and real estate (-0.5%).
Stock movers: BridgeBio Pharma (BBIO) +76% to $32.04 on Monday, Carvana (CVNA) +40% to $55.80 on Wednesday. On the downside, Apellis Pharmaceuticals (APLS) -38% to $52.46 on Monday (then -24% to $40 on Tuesday and -15% to $34.24 on Thursday), and Vir Biotechnology (VIR) -45% to $12.70 on Thursday.
Futures: A strong Friday rally helped September WTI crude oil (CLU3) end a choppy week in the plus column at $77.07. Last Tuesday August gold (GCQ3) tagged its highest price ($1,988.30) since early June, then pulled back to end the week modestly higher at $1,966.60. Week’s biggest up moves: August milk (DCQ3) +10.7%. Week’s biggest down moves: September lumber (LBSU3) -5.7%, October aluminum (ALV3) -3.4%.
Coming this week
A very busy week includes a Fed interest rate announcement, the first look at Q2 GDP, Fed inflation (PCE Price Index), and durable goods:
●Monday: Chicago Fed National Activity Index, S&P Global Manufacturing and Services PMIs (flash)
●Tuesday: S&P Case-Shiller Home Price Index, FHFA House Price Index
●Wednesday: New Home Sales, Fed interest rate announcement
●Thursday: Durable Goods Orders, Q2 GDP (initial estimate), Trade Balance in Goods (advance), Wholesale and Retail Inventories (advance), Pending Home Sales
●Friday: Personal Income and Spending, PCE Price Index, Consumer Sentiment (final)
It’s “Big” week on the earnings calendar—several big tech, big pharma, big oil, big airlines, and big consumer names will release their numbers. Some highlights:
●Monday: F5 (FFIV), Medpace (MEDP), NXP Semiconductors (NXPI)
●Tuesday: Verizon (VZ), Xerox (XRX), Alphabet (GOOGL), Microsoft (MSFT), Snap (SNAP), Teladoc (TDOC), Visa (V), Waste Management (WM)
●Wednesday: Meta (META), Boeing (BA), Fiserv (FI), General Dynamics (GD), Coca Cola (KO), Silicon Laboratories (SLAB), AT&T (T), Tower Semiconductor (TSEM), Chipotle (CMG), eBay (EBAY), Mattel (MAT), O’Reilly Automotive (ORLY), Seagate (STX)
●Thursday: AbbVie (ABBV), Baxter (BAX), Hershey (HSY), Southwest Airlines (LUV), Mastercard (MA), Amazon (AMZN), Ford (F), First Solar (FSLR), Intel (INTC), Juniper Networks (JNPR), Roku (ROKU), Verisign (VRSN), United States Steel (X)
●Friday: Colgate Palmolive (CL), Chevron (CVX), Procter and Gamble (PG), Exxon Mobil (XOM)
Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.
Will resistance become support?
The SPX is up a little more than 2% since breaking out above the implied resistance of its June-July highs. Because price momentum ebbs and flows, many traders look for markets to test well-defined breakout levels before extending a move.
The basic idea after an upside breakout is that, if the move “has legs,” buyers will support the market when prices pull back to that level—that is, former resistance should become support. Any significant or prolonged downside penetration of the level may cast doubt on the rally.
Although the following chart shows the somewhat messy reality of how this principle plays out in the real world, there’s one important takeaway: Since rallying off its October 2022 low, the SPX has pulled back to test—or signficantly penetrate—nearly all of its breakouts above prior highs:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.) Note: It is not possible to directly invest in an index.
The only significant exception was the early-June breakout above the upward-sloping April-May consolidation, which occurred a little above 4,200.
The SPX’s most recent breakout is still in its infancy. But bulls will be watching closely to see if this former resistance level acts as support, if and when the SPX tests it.
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