Stocks Inch Higher as Money Keeps Shifting to New Areas

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Last week was a lot more interesting than it seemed.

After all, the S&P 500 rose just 0.6 percent in the holiday-shortened week between Friday, February 15 and Friday, February 22. Most other major indexes hardly budged, either.

But there was disruption beneath the surface. Major companies like Kraft Heinz (KHC) and CVS Health (CVS) suffered historic selloffs, while buyers scrambled for access to lesser known stocks. Those include Garmin (GRMN), Roku (ROKU), Wayfair (W), and Avis Budget (CAR).

Money also flocked to Chinese stocks as Washington and Beijing made progress on trade talks. Meanwhile, central bankers seemed to lay the groundwork for easier monetary policy before Federal Reserve Chairman Jerome Powell‘s appearance in the Senate tomorrow.

Check out some of these Chinese movers: Streaming-video company Iqiyi (IQ) — “the Netflix of China” — rallied more than 25 percent despite missing earnings estimates. Video game provider Huya (HUYA) rose 22 percent for no apparent reason. Solar-panel maker Jinko Solar (JKS) also surged 31 percent.

Green New Deal?

Speaking of solar, did you know the Invesco Solar Energy ETF (TAN) gained 8 percent last week and is up 36 percent this year? Don’t forget about Representative Alexandria Ocasio-Cortez and her “Green New Deal.”

Last week saw money shifting to metals as gold futures (@GC) and copper futures (@HG) reached their highest levels in over eight months. Part of the move resulted from the Fed’s shift toward dovish monetary policy. Part of it resulted from optimism that a trade deal with China will boost demand for commodities. And part of it resulted from some bullish analyst recommendations.

So what happened to KHC? The iconic grocery-shelf favorite took a huge writedown on brands like Kraft and Oscar Mayer, slashed its dividend and warned about future profitability. The stock cratered 27 percent for the week, making it the worst performing member of the S&P 500 over the period.

CVS, another mainstay of U.S. shopping centers, got slammed on news of lower drug prices. Other big losers on the week included oil driller Concho Resources (CXO) and video-game maker Electronic Arts (EA).

Garmin Navigates Higher

But then you had GRMN. Unlike KHC, this blast from the past is successfully reinventing itself as a fitness-device maker. Its blowout quarterly results and guidance landed it at the top of the weekly rankings — up 16 percent. The stock also navigated to its highest close in over a decade.

Gold producer Newmont Mining (NEM) was the second-biggest gainer in the S&P 500 on reports of a potential merger. Lithium producer Albemarle (ALB) snuck into the No. 3 spot.

Other companies outside the S&P 500 had big moves. CAR, for instance, beat estimates. Delphi (DLPH) ripped 23 percent despite relatively weak quarterly results. It followed a similar move by peer Dana (DAN) the previous week. Are investors looking for bigger turnarounds in those auto-part suppliers?

Cryptocurrency-related stock Riot Blockchain (RIOT) rallied 60 percent as Bitcoin and Ethereum climbed. E-commerce software maker Trade Desk (TTD) rallied 25 percent on strong results. Video company ROKU, furniture seller W and mobile-screen maker Universal Display (OLED) also ripped on their quarterly numbers.

S&P 500 with Line at Price indicator and 200-day moving average.

Returning to the broader market, the S&P 500 has risen in eight of the last nine weeks. The index is now back to the same 2800 area where it last hit resistance in early December. Will it break out, or roll over? Some big events this week may help answer those questions.

Powell in the Senate

First, the Fed: Powell appears before the Senate Banking Committee at 10 a.m. ET tomorrow and Wednesday. Attention will likely focus on the central bank’s “balance sheet.” Simply put, balance sheet reduction is “hawkish” and similar to raising rates. Halting balance sheet reduction, expected by most experts, would be “dovish.” Keep an eye on metals.

Next, China: President Trump extended a Friday deadline for tariff increases in favor of meeting with counterpart Xi in late March. There aren’t many details yet, but China will likely agree to import more from the U.S. Investors may want to keep an eye on agriculture-related stocks and semiconductors.

Other items this week include housing starts and building permits tomorrow morning, oil inventories Wednesday and fourth-quarter gross domestic product on Thursday. GDP’s normally a big deal but this time could matter less because of the government shutdown. The Institute for Supply Management’s manufacturing index rounds out the week on Friday morning.

Noteworthy earnings include Home Depot (HD) and Macy’s (M) tomorrow morning, followed on Thursday afternoon by Square (SQ).

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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.