Another Wild Ride as Stocks Keep Climbing

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Stocks kept climbing last week, but it wasn’t a smooth ride.

The S&P 500 rose 2.1 percent between Friday, November 2, and Friday November 9. The index swung wildly as it tested a key level from last month and investors digested a broad array of headlines. Money also kept flowing away from technology and the Nasdaq in favor of “boring” stocks and the Dow Jones Industrial Average.

One big event was the mid-term elections. While Democrats took control of the House of Representatives, investors viewed the health-care sector as the big winner because the political consensus seemed to move toward increased government spending on medical care.

Then you had a sense of weaker economic growth overseas as Chinese auto sales shrank 11.7 percent and Euro Zone business confidence fell to a two-year low. Casino giant Wynn Resorts (WYNN) cautioned of a slowdown in Macau and White House adviser Peter Navarro took a hard line toward Beijing ahead of the G20 meeting at the end of the month.

There was also more bearishness in technology following Apple’s (AAPL) poor quarter the previous week. This time investors hammered video-game makers and took a glass-half-empty view of Square (SQ). Semiconductors struggled with disappointing results and worries about iPhone production cuts.

Finally, don’t forget about the Federal Reserve. Interest rates were unchanged and policymakers kept the door open to an increase on December 19 — pretty much in line with everyone’s expectations. That, combined with a hot inflation reading on Friday, kept the U.S. dollar near its 52-week high.

S&P 500 with moving averages and potential resistance line.

Every major sector rose at least 1 percent last week, led by health care with a 4 percent gain. Safe havens like real-estate investment trusts, utilities and consumer staples also outperformed. Energy and technology rose the least.

TripAdvisor (TRIP) was the top-performer in the S&P 500, spiking 18 percent on strong results. Drug maker Mylan (MYL) followed with a 17 percent rally.

Cosmetics firm Coty (COTY) found itself on the bottom of the totem pole, down 23 percent, after supply-chain problems dragged sales below estimates. Activision Blizzard (ATVI) was second-worst, cratering 20 percent after usage slipped and revenue missed.

This coming week is less active but still has a few big economic events and quarterly reports.

Cannabis companies Tilray (TLRY) and Cronos (CRON) release earnings tomorrow, followed by peer Canopy Growth (CGC) the next day. Home Depot (HD) numbers are also due. Wednesday also brings the consumer-price inflation index.

Thursday’s busy with initial jobless claims, retail sales and crude-oil inventories. Wal-Mart Stores (WMT), Nordstrom (JWN) and Nvidia (NVDA) issue results as well.

Remember next week is shortened for Thanksgiving.

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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.