Market Keeps Levitating amid Nirvana Conditions

Market Keeps Levitating amid Nirvana Conditions
Goldilocks doing yoga.

Stocks keep levitating to new highs for the year, riding a wave of Nirvana-like conditions.

The S&P 500 2.9 rose percent between Friday, March 8, and Friday, March 15. Not only was it the biggest weekly advance since the end of November. The index also seemed to establish itself firmly above the key 2800 level most people were watching.

The Nasdaq-100 was even more impressive with a 4.2 percent gain on the week. Its own version of the VIX fear index ($VXN.X) fell to the lowest level in 15 months.

A mix of circumstances, rather than a single catalyst, instilled confidence. Volatility’s disappearing. The consumer is strong. Doomsters keep getting proven wrong about political and economic risk. Oil’s rising but inflation’s still low. The Federal Reserve is dovish. It’s like Goldilocks doing yoga.

Technology Leads the Charge

Technology led the advance, bolstered by semiconductors. Nvidia (NVDA) spurred the rally by gobbling up data-center player Mellanox (MLNX) for a 14 percent premium. That helped restore confidence in an industry hurt by slowing smart-phone demand and weakness in China. NVDA’s 13 percent gain on the week made it the best performing member of the S&P 500.

Then on Thursday, Broadcom (AVGO) CEO Hock Tan said chip sales will bottom in the second quarter. It followed a similar prediction by Stephen Sanghi of Microchip Technology (MCHP) last month.

Biotechnology also outperformed as investors bought last week’s pullback.

Aside from technology, money flowed into energy stocks as crude oil (@CL) pushed to its highest levels since mid-November. Traders may want to keep an eye on black gold, given instability in Venezuela and OPEC’s apparent discipline heading into its next meeting on April 17-18.

S&P 500 chart showing highest close since Oct. 9 and 50-day moving average set to rise above 200-day moving average in eight days for a so-called golden cross chart pattern.
S&P 500 showing Friday’s close and select moving averages.

Some global indexes led the broader market. Latin American stocks rose 5 percent after Brazilian President Jair Bolsonaro said his landmark pension reform will pass in the first half. India also kept running as investors prepare for elections in April and May.

Other big movers in the S&P 500 included Devon Energy (DVN), up 11 percent on no news. Ulta Beauty (ULTA) surged 10 percent to a new all-time high as its partnership with Kylie Jenner drove traffic.

Boeing Takes a Beating

That’s the good. How about the bad? How about Boeing (BA)? The aerospace giant was the S&P 500’s biggest loser last week, down 10 percent, after a fatal crash of its 737 MAX planes triggered mass-groundings around the world. That made industrials the only negative sector for the week.

Let’s quickly recap the economic news, which was book-ended by positive consumer numbers:

  • Monday: Retail sales for January rose more than expected as shoppers bounced back quickly from a weak December.
  • Tuesday: February consumer-price inflation was tame.
  • Wednesday: Durable-goods orders were mixed. Producer-price inflation was slower than expected. Crude oil rallied as inventories dwindled.
  • Thursday: Initial jobless claims missed slightly, and new-home sales missed by a wider margin.
  • Friday: Consumer sentiment for March rose more than expected as negativity from the government shutdown faded. That echoed February 26’s consumer-confidence report. There’s also been growing evidence that wages are accelerating at the lower end of the income scale.

This Week’s Agenda

This week features a handful of important events, but isn’t super busy overall.

Today brings NAHB’s homebuilder index. Nothing’s scheduled for tomorrow, except FedEx (FDX) earnings.

The Fed announces monetary policy on Wednesday, followed by Chairman Jerome Powell’s press conference. Attention will likely focus on the central bank’s balance sheet because most forecasters expect interest rates to remain unchanged.

Crude oil inventories are also due in the morning and Micron Technology (MU) issues numbers after the closing bell. Levi Strauss (LEVI) is also expected to price its initial public offering (IPO). Are you ready for Lyft (LYFT) in the following weeks and Uber (UBER) later in the spring?

Initial jobless claims and Nike (NKE) results follow Thursday. Friday’s items include existing home sales and Tiffany (TIF) earnings.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on 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 apprised 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.