Stocks Just Had Their Best Quarter Since 2013

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Stocks dipped slightly last week, but still had their best quarter in almost five years.

The S&P 500 slid 0.5 percent between Friday, September 21, and Friday, September 28. It was only the third negative week in the last 13. The index’s 7.2 percent gain since the end of June represented its best quarterly return since the final three months of 2013. Fortunately, readers of Market Insights had a good sense the rally was coming.

Last week’s price action was sharply divided between sectors. Value-oriented financials and materials got hammered after Federal Reserve Chair Jerome Powell spoke of tame inflation. His team of policymakers still hiked rates, punishing home builders.

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But there were also green shoots. Energy stocks rallied as sanctions on Iran drove oil to its highest price in more than three years. Biotechnology and medical devices led a stealth rally in the health-care sector. Momentum buyers returned to technology, especially software and video games.

Other economic news had little impact. Durable-goods orders were mixed. Initial jobless claims rose more than expected from extreme lows, possibly because of disruptions from Hurricane Florence.

Chart watchers studying the S&P 500 may notice the index had a bearish “outside day” on Wednesday. (It made a lower low and a higher high than the previous session.) Does that signal a reversal, or did it merely result from uncertainty around the Fed? Technicians may be asking that question today.

S&P 500 chart with select patterns marked.

Medical-device maker Abiomed (ABMD) was the index’s top gainer last week, climbing 17 percent on positive data related to its Impella heart pumps. Biotech Alexion Pharmaceuticals (ALXN) was second-best, up 14 percent, on positive data related to its Soliris neurological drug.

Edwards Lifesciences (EW), another health-care name, took the No. 3 spot amid speculation it may be acquired by Johnson & Johnson (JNJ).

A.O. Smith (AOS) and Cboe (CBOE) weren’t so lucky. Their 11 percent weekly slides landed them at the bottom of the rankings. Tesla Motors (TSLA), a heavily traded name despite not being in the S&P 500, fell a similar amount after the U.S. Securities and Exchange Commission accused CEO Elon Musk of fraud. (He denies wrongdoing.)

This week brings monthly employment numbers and a couple of noteworthy earnings reports.

Today’s main item is the Institute for Supply Management’s manufacturing index and the Census Bureau’s construction-spending report. Tomorrow brings a speech by Fed Chair Powell.

Wednesday’s items include ADP’s private-sector payrolls report, ISM’s services index and crude-oil inventories.

Constellation Brands (STZ) issues quarterly results Thursday morning. While normally a quiet name, it may draw some interest on the heels of its big investment in cannabis producer Canopy Growth (CGC). Initial jobless claims are also due in the morning, with Costco (COST) earnings scheduled for the post-market.

The week concludes with the Labor Department’s non-farms payrolls report on Friday morning.

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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.