Bulls active as Fed prepares rate hike

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Bulls are running in the stock market, even with interest rates set to climb this week.

The S&P 500 rose 1.6 percent between Friday, June 1, and Friday, June 9. Not only did the index reach its highest price since March 13, but its crash protection was the cheapest since late January. Yep, Cboe’s VIX “fear index” is back to levels last seen before February’s huge volatility surge.

That’s not all. It was also the third straight positive week for the S&P 500, capping off back-to-back positive months in April and May. Neither of those events had happened since the crash, either.

While the numbers have been strong all year, Wall Street now seems less concerned about geopolitical risk and trade wars. It’s also embracing initial public offerings and economically sensitive stocks — signals of increased risk appetite.

Retailers, for instance, surged new highs as investors looked for survivors after a wave of bankruptcies and store closures. Under Armour (UA) was the bigger gainer in the S&P 500, up 15 percent. Kohl’s (KSS) and Macy’s (M) were close behind. (Click here for more.)

S&P 500 index, with key moving averages.

Attention now turns to the Federal Reserve, which forecasters predict will raise interest rates another quarter point on Wednesday. The European Central Bank is expected to signal a reduction in quantitative easing at its own meeting the next morning. In both cases, policymakers want to remove super-low rates dating back to the subprime crisis.

Other events this week include inflation reports tomorrow and Wednesday, retail sales and initial jobless claims on Thursday and consumer sentiment on Friday.

Several other companies stood out last week. McDonald’s (MCD) shot to a four-month high amid a flurry of call buying. Twitter (TWTR) hit its loftiest peak since April 2015 on news it would be added to the S&P 500. Options volume also hit a record in Iqiyi (IQ) as millennial traders gain interest in the Chinese streaming-video platform.

Utilities were the weakest major sector, falling 3 percent, as investors braced for higher interest rates. Solar-energy stocks and Latin American equities also slid.

Biotech Nektar Therapeutics (NKTR) cratered 40 percent amid disappointing cancer-drug trial results. That made the one-time high-flier the S&P 500’s biggest weekly decliner. Two others vied for second with drops of 7 percent each: Weak casino traffic in Macau weighed on Wynn Resorts (WYNN) and Lam Research (LRCX) was hurt by a negative analyst note.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.