This was a generally quiet week in the senior indexes, consolidating some of the prior week’s move up. That said the Russell 2000 had some very nice action with a “breakout!”. Otherwise pretty quiet on the news front except for TRADE WARS!(tm):
On Thursday, several news outlets reported that China had made an offer to cut its trade surplus with the U.S. by $200 billion, but a China official on Friday denied that an offer had been made.
For the week the S&P 500 closed down 0.5% while the NASDAQ fell 0.7%. The Russell 2000 diverged, gaining 1.3%.
The only major economic report this week was retail sales which gained 0.3% in April vs a revised 0.8% gain (up from 0.6%) in March.
Treasury yields were back in focus as a move over 3% happened again.
“The additional backup [in yields] appears to be driven by stronger expectations for growth and inflation, and the potential for additional Fed action beyond September,” said Lindsey Piegza, chief economist for Stifel.
That was accompanied by some strength in the dollar chart.
Week FIVE of very good action in the crude oil chart.
Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski.
The week ahead…
The Federal Reserve will release the minutes from its May 1-2 meeting, which could add to the dollar and Treasury yield climb should they sound a hawkish tone. Not too much else on the docket that strikes the imagination at the moment.
Short term: The S&P 500 remains above this trend line connecting highs of 2018.
The Russell 2000 = boom! This article states some reasoning for the divergence.
Small cap stocks tend to be more U.S. focused in terms of their geographic footprint and where they derive their revenue. As such, they are seen as insulated from all manner of international headwinds, including trade policy and other geopolitical tensions. Furthermore, they are not suffering from recent strength in the dollar, which typically emerges as a headwind for large cap companies by eroding their overseas profits.
According to FactSet, U.S. revenue exposure for the components of the Russell 2000 is 79.4%, well above the S&P’s 69.7% domestic exposure and the Dow’s 61.7%.
The NYSE McClellan Oscillator remains in a positive spot.
Long term: Still very positive for the “buy and never sell” crowd.
Charts of interest / Big Movers:
Tuesday, Agilent Technologies (A) dropped 9.7% after the maker of medical instruments and other equipment posted quarterly earnings that matched forecasts late Monday.
Wednesday, Macy’s (M) jumped 10.8% after the retailer reported upbeat sales and outlook.
Under Armour (UA) jumped 6% Wednesday, adding to a year to date surge. The stock is up nearly 40% since the start of the year.
Not as great of a story at J.C. Penney (JCP) as it slumped 12.4% Thursday after reporting a drop in first-quarter sales and cutting its outlook.
Same with Nordstrom (JWN) Friday, as it tumbled 10.9% after the retailer reported weaker same-store sales growth.
Minerva Neurosciences (NERV) rose by about 14% Thursday after reporting positive results from a drug trial.
Friday, Campbell Soup (CPB) dropped 12.4% after the company cut its full year guidance. The company also said Chief Executive Denise Morrison will retire, effective Friday. With the drop in Phillip Morris (PM) mid April this has not been a good year for some of the low volatility “safety stocks”.
Applied Materials (AMAT) slid 8.3% after the chip maker on a weak sales outlook.
Not a big mover necessarily but a “nice chart” alert.
We highlighted Trade Desk (TTD) last week – this move continues.
Have a great week and we’ll see you back here Sunday!