New Highs For S&P As Good News Draws More Cash From the Sidelines

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New Highs For S&P As Good News Draws More Cash From the Sidelines

Stocks hit new highs again last week as strong earnings and economic data kept pulling money from the sidelines.

The S&P 500 rose 1.65 percent between Friday, July 19, and Friday, July 26, and made a new record high for the fourth straight week. It also gained comfort above 3,000, less than a month after first testing that level.

Alphabet (GOOGL), United Parcel (UPS), Intel (INTC), Starbucks (SBUX) and Twitter (TWTR) were some of the major companies to rally on the heels of quarterly numbers. Second-quarter gross domestic product also surprised to the upside, with indications that previous reports understated income gains in recent years.

Unemployment claims also fell more than expected as fewer Americans went jobless. Durable-goods orders beat estimates and provided hopes that business investment is re-accelerating.

Most Sectors Advance

Internet companies, now listed under the Communications Sector rather than Technology, led the charge. Semiconductors broke out to new record highs. Banks tried to claw their way out of a tight trading range. Small caps, software companies and transports also outperformed.

The main laggards were safe havens like gold miners and utilities. Energy also struggled with oil still facing worries about a supply glut.

S&P 500 with select moving averages and 3,000 level marked.
S&P 500 with select moving averages and 3,000 level marked.

Overall, investors favored “risk-on” stocks, especially companies that will benefit from a stronger economy. All told, more than two-thirds of the S&P 500 member companies rose on the week, and about 80 made new 52-week highs.

United Parcel, Hasbro Lead

A pair of once-forgotten names were the index’s best performers last week. UPS went from “boring” to soaring after the success of its next-day air service forced investors to re-imagine the story. Shares spiked 17 percent in the week.

Hasbro (HAS) followed with a 15 percent gain after strong demand for its own products and third-party toys caused earnings and revenue to beat estimates.

Align Technology (ALGN), once a high-flying dental stock, led to the downside after warning about its future business. Weakness in China was a major culprit, erasing 29 percent of ALGN’s value.

Mohawk Industries (MHK) was second-worst, down 16 percent. The flooring maker warned of weak volumes and pricing, making you wonder whether the housing market will ever kick into gear.

Here’s another interesting tidbit: FB, TWTR and Snap (SNAP) all reported better-than-expected quarterly results. SNAP and TWTR both rallied more than 10 percent, while FB drifted. Are social-media investors reallocating capital from the market leader to smaller rivals?

Massively Busy Week Ahead

The forward calendar is packed. Aside from being the busiest week of earnings season, there’s also a major Federal Reserve meeting and monthly employment data.

The Fed is most important. Simply put, policymakers expected to cut interest rates for the first time in 10 years on Wednesday afternoon. Beyond that, investors will read the statement and listen to Jerome Powell for clues on the central bank’s next move.

Today’s mostly quiet, aside from Beyond Meat’s (BYND) second quarterly report in the afternoon.

Tomorrow features personal income and spending, consumer confidence and pending home sales. Big names in the premarket include Mastercard (MA), Merck (MRK), Pfizer (PFE), Eli Lilly (LLY) and Procter & Gamble (PG).

Apple (AAPL) and Advanced Micro Devices (AMD) loom large on Tuesday afternoon. Electronic Arts (EA) and Amgen (AMGN) also report.

Wednesday’s got European gross domestic product, ADP’s private-sector payrolls report and the Fed. General Electric (GE), Qualcomm (QCOM) and Western Digital (WDC) are some of the more noteworthy earnings reports.

Thursday features initial jobless claims, the Institute for Supply Management’s manufacturing index and construction spending.

The week concludes with the non-farm payrolls, usually an important economic report, plus consumer sentiment. Exxon Mobil (XOM) and Chevron (CVX) also issue results.

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David Russell is VP of Market Intelligence at TradeStation Group. 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.