Stocks Down as Range Tightens Before a Huge News Month

Stocks Down as Range Tightens Before a Huge News Month

Stocks fell again last week but remain trapped in a range as investors wait for some huge news events next month.

The S&P 500 slid 1 percent between Friday, September 20, and Friday, September 27. Still, the index held some key levels and remained within striking distance of record highs.

China seems to be the only issue on everyone’s minds. If President Trump ends more than a year of tariffs and conflict with the Asian giant, traders will probably rush back to stocks. Business confidence could return and safe havens like bonds and gold could get liquidated. Money managers even seem to have chosen a new set of stocks in the event of a good outcome.

But if there’s a bad outcome, just the opposite could happen. Investors, already skittish about risk-taking, could get even more fearful. Executives could plan for a weaker-demand environment. A vicious cycle could take hold and threaten confidence just as the holiday-shopping season begins.

So far, there have been signs of progress between China and the U.S. The next thing to watch will be Vice Premier Liu He’s visit to Washington, which reportedly starts on October 10.

Facebook’s Ugly Week

Facebook (FB) had its worst week of the year, down almost 7 percent, amid news the Justice Department is probing the social media giant. Its Libra cryptocurrency project also seemed to face an increasingly tough battle against global regulators.

Facebook (FB) chart showing 50-day moving average and last earnings report.
Facebook (FB) chart showing 50-day moving average and last earnings report.

Speaking of crytocurrencies, Bitcoin (BTCUSD) suffered its biggest decline since November. Experts blamed a drop in the hash rate and tepid demand for Bakkt’s new futures.

Healthcare was the weakest major sector overall, sliding almost 3 percent. While no news events seemed to explain the drop, longer-term forces continue to weigh on the industry: politics, debt and pricing. Biotechnology stocks led the carnage.

Energy and solar stocks also fell sharply, reversing gains the previous week.

Gold miners dropped almost 4 percent, despite weakness in the S&P 500. Are buyer fatigue and the strong dollar taking a toll?

Other safe havens like consumer staples and utilities rose more than 1 percent last week.

S&P 500 chart with key levels marked.
S&P 500 chart with key levels marked.

A Busier Week Ahead

S&P 500 stayed above its 50-day moving average and its price range for most of August. Some chart watchers may consider it a positive sign if those levels hold.

This week is also busier than last, with some key economic data. The news flow will gain importance later in the month as quarterly earnings come out and trade talks commence.

Today’s quiet but tomorrow brings the Institute for Supply Management’s manufacturing index and construction spending. It’s also National Day in China. Some experts have said leaders in Beijing will be more willing to make concessions after the big holiday passes.

Wednesday features ADP’s private-sector payrolls report and crude-oil inventories.

Thursday’s the only session with noteworthy earnings: PepsiCo (PEP) in the premarket and Costco (COST) after the closing bell. Initial jobless claims, factory orders and ISM’s service-sector index are also due.

The week ends with non-farm payrolls on Friday morning. Federal Reserve Chairman Jerome Powell will also make a speech in the afternoon.

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