Stocks just broke a four-week losing streak as trade tensions with China eased.
The S&P 500 rose 2.8 percent between Friday, August 23, and Friday, August 30. Gains were extremely broad, with more than 90 percent of the index’s member stocks advancing. Every major sector rose as well, led by risk-on groups like industrials and communications.
The big turn came early on Thursday when Beijing indicated it wouldn’t retaliate against the latest round of U.S. tariffs. President Trump seemed to confirm that later in the morning by saying talks had moved to “a different level.” It was a sharp contrast from the previous week’s open clashing.
There were few other big stories and volumes were light ahead of the long holiday weekend.
Cyclical Sectors Lead the Bounce
Semiconductors and transports, which benefit more from a strong economy, rose the most last week. Chinese Internet stocks and retailers also bounced from long-term lows.
Dollar General (DG) was the single best performing member of the S&P 500, rallying 14 percent after quarterly results beat estimates and management raised guidance. Cimarex Energy (XEC) followed with a 12 percent gain as the obscure energy fracker bounced from a 10-year low.
Ulta Salon (ULTA) was the big loser, crashing 26 percent after missing across the board: earnings, guidance, same-store sales and revenue. Alexion Pharmaceuticals (ALXN) was second-worst, down 13 percent, after Amgen (AMGN) challenged patents on its Soliris blood drug.
Busy Week After the Holiday
The S&P 500 spent most of August trapped between 2825 and 2940. While it’s not clear what will drive it out of that range, several big events are scheduled for this week.
Today brings the Institute for Supply Management’s manufacturing report and construction spending. It also marks the resumption of the British Parliament as tensions mount with Prime Minister Boris Johnson. Yes, Brexit is still a huge open question. In fact, the euro hit a new two-year low on Friday.
Tomorrow’s main item is the Federal Reserve’s Beige Book economic report in the afternoon.
Thursday features ADP’s private-sector payrolls report, initial jobless claims and crude oil inventories. (As usual on a holiday week, oil numbers come 30 minutes later than normal.) ISM’s service-sector index and factory orders are also due.
Non-farm payrolls are due Friday morning. Federal Reserve Chairman Jerome Powell also delivers a speech from Switzerland at 12:30 p.m. E.T.