Bears Came Back in Force Last Week

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The bears came back in force last week, turbo-charged by a hawkish Fed and geopolitical jitters.

The S&P 500 slid 5.95 percent between Friday, March 16, and Friday, March 23. It was the second drop in a row, and the worst showing in over two years. Fewer than 1-in-10 index members even advanced, and barely a dozen made new 52-week highs.

“The economic outlook has strengthened in recent months,” Federal Reserve policymakers said in their statement on Wednesday as they hiked interest rates for the fourth time since March 2017. Their projection for gross domestic product inched up, as well.

Investors shrugged at the good news and focused on the negative. First, more salvos in a potential trade war against China: Washington fired off $60 billion of tariffs, while Beijing retaliated with $3 billion of duties and threats of buying fewer Treasuries. Second, technology stocks got hammered by a user-data flap at Facebook (FB) and general profit-taking in stalwarts like Alphabet (GOOGL) and Apple (AAPL). Financials also stumbled as investors saw no reason to add only a few weeks before banks kick off earnings season.

Last week’s selloff planted the S&P 500 at its lowest price level since the big drop in early February, while the Dow Jones Industrial Average probed areas last seen in November. Cboe’s Volatility index remained well below last month’s peaks, although other measures of fear such as bonds, gold and the Japanese yen advanced.

Some companies benefited from the geopolitical backdrop. Rising oil prices lifted energy drillers like EOG Resources (EOG), Anadarko Petroleum (APC) and ConocoPhillips (COP) to the top of the S&P 500’s rankings. Military contractors including Raytheon (RTN) and Northrup Grumman (NOC) climbed.

Oracle (ORCL) suffered the index’s biggest drop, down 14 percent, on signs the once-mighty software company was behind the cloud-computing curve. Pharma stock Abbvie (ABBV) was second-worst after regulators spurned early approval of a cancer drug.

There were some other bright spots, especially solar energy. Gold miners eked out a small gain and housing-related names tried to stabilize at the end of a brutal quarter.

This week only has four trading sessions because of Good Friday. Today’s agenda is quiet, with Red Hat (RHT) earnings as the main event.

Tomorrow brings Case-Shiller’s index of home prices, consumer confidence and numbers from Lululemon (LULU).

The final revision of fourth-quarter GDP, mortgage applications, pending home sales and crude-oil inventories are due Wednesday. Walgreen Boots Alliance (WBA) reports earnings as well.

Thursday’s lineup features initial jobless claims, personal income and spending.

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