Stocks Retreat From Key Level Amid Bad News

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Stocks just had their worst week of the year, retreating from a key resistance level amid a string of bad news.

The S&P 500 fell 2 percent between Friday, March 1, and Friday March 8. It was the biggest drop since the crescendo of selling before Christmas. The Nasdaq-100 declined a similar amount, ending an 11-week winning streak.

Negative economic news on three continents drove the moves. In Europe, central bankers cut growth forecasts and pumped more liquidity into their financial system. China reported a much-worse-than-feared drop in exports, spurring questions about a region that’s dominated global growth for more than a generation.

Meanwhile in the U.S., non-farm payrolls barely showed any increase. Sure, there were other positives last week, like housing starts and jobless claims. But the question now is when — if ever — the Federal Reserve will hike interest rates again.

Investors responded to the data by liquidating economically sensitive sectors like energy, industrials and small-caps. Safe-haven gold miners rose.

Health Care Hammered

Health care also took a bearing, down almost 4 percent on the week. One cause was lingering concern about lower drug pricing. Then Food and Drug Administration Commissioner Scott Gottlieb resigned, potentially creating uncertainty for up-and-coming biotechnology stocks.

But the biggest cause of the S&P 500’s drop last week may have been simply technical after the index stalled at 2800, a key level from the fourth quarter. Throw in all the bad news and buyer fatigue after big gains in January and February. Then last week’s pullback makes more sense.

Losers outpaced gainers in the index by more than 4 to 1. Grocery chain Kroger (KR) endured the worst drop, down 13 percent on weak earnings. Dialysis company DaVita (DVA) followed with a 12 percent decline amid news the government will change payment policies.

S&P 500 index with 2800 resistance zone and key moving averages.

Dollar Tree (DLTR), on the other hand, rose 6 percent after beating estimates and announcing plans to close stores. Tobacco stock Altria (MO) was second best, up nearly 5 percent. The departure of vaping critic Gottlieb from the FDA helped fuel its gain.

This week’s calendar begins and ends with the consumer. U.K. politicians also have some key votes on Brexit.

Monthly retail sales are the main item today, followed by consumer-price inflation tomorrow.

Wednesday brings durable-goods orders, crude-oil inventories and the producer-price index. A trio of Chinese reports in the evening — retail sales, fixed investment and industrial production — could also impact markets.

Thursday’s main items are initial jobless claims and new-home sales. Consumer sentiment wraps things up 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.