Stocks Near Record Highs Halfway Through the Year

Stocks Near Record Highs Halfway Through the Year

Stocks fell slightly last week but still ended June within striking distance of record highs.

The S&P 500 slid 0.3 percent between Friday, June 21, and Friday, June 28. Nonetheless, the index registered the fifth winning month of the year and its best first half since 1997. It’s also barely 1 percent below its recent all-time high.

Looking to explain the move? Try the old adage that “bull markets climb a wall of worry,” because that’s what seemed to happen. Investors fretted about a slowing economy and President Trump’s tariffs squeezing profits. That sent them scrambling into cash early in the month, followed by a gradual return when the “other shoe” never dropped.

Last week, the good news was a clean bill of health for U.S. banks and some big acquisitions. Strong results from Micron Technologies (MU) lifted a cloud of anxiety from the semiconductor industry. Meanwhile, Trump abstained from nerve-rattling tweets before meeting with Chinese president Xi.

Chips, Banks Rebound from Lows

Economically sensitive groups like semiconductors, banks, materials and small caps led the charge last week. Meanwhile safe-haven utilities and real-estate investment trusts declined. That’s a potential sign of bullish sentiment and risk appetite.

Data points were modestly negative, with initial jobless claims rising more than expected as consumer confidence and new-home sales missed estimates. But those headlines seem less frightening now that the Federal Reserve has opened the door to a rate cut on July 31.

S&P 500 chart with select moving averages.
S&P 500 chart with select moving averages.

The market’s also holding its breath for a trade deal between the U.S. and China. Even minor progress would likely boost confidence.

Botox maker Allergan (AGN) was the biggest gainer in the S&P 500 last week, surging 28 percent after accepting a $63 billion takeover from AbbVie (ABBV).

Western Digital (WDC) followed with a 19 percent gain after rival MU reported strong memory-chip prices. MU took the bronze medal last week, up 16 percent.

Drug Stocks Under Pressure

Two of the three worst performers were drug makers, both falling about 8 percent. Bristol-Myers Squibb (BMY) took a hit on news the Justice Department may slow its merger with Celgene (CELG). And, there were poor results from an important trial of its Opdivo cancer treatment. ABBV also dropped after paying a rich premium for AGN.

Food company ConAgra (CAG) fell a similar amount on weak quarterly results.

Cryptocurrencies were other big movers last week as Bitcoin (BTCUSD) rallied to its highest level in 1-1/2 years. It pulled back sharply on Wednesday and Thursday, but the token still ended the week up more than 25 percent.

Investors now enter a quiet week, broken up by the Fourth of July on Thursday. Still there are some big economic reports.

The Institute for Supply Management’s manufacturing index is due today, along with construction spending.

Tomorrow’s quiet, but Wednesday features ADP’s private-sector employment report, jobless claims, ISM’s service-sector index and oil inventories. Markets also close at 1 p.m. ET and will remain closed through Independence Day on Thursday.

The Labor Department’s big monthly employment report concludes the week Friday morning.

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David Russell is Global Head of Market 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.