Stocks Just Had a Roller Coaster Week of Fear, Hope and Volatility

Stocks Just Had a Roller Coaster Week of Fear, Hope and Volatility

Stocks ended last week barely changed, but it was a wild ride of hope, fear and volatility.

The S&P 500 crashed early on economic worries, and one point was down 3.6 percent. It quickly bounced as investors remembered some potential positives and ended just 0.3 percent lower. The index swung a full 137 points from top to bottom, its biggest weekly range since the start of June.

There was initial optimism about a trade deal with China, but then a weak manufacturing report spurred recession fears. Sellers hammered economically sensitive stocks like industrials and financials. The bearish momentum continued through Thursday morning when the index held its ground and turned on a dime.

After all, several positive events may be on the horizon. First, President Trump’s receiving a trade delegation from China this week. Progress toward ending the current tariff fight would probably be viewed as a reason to buy stocks.

Second, earnings season begins next week and continues through mid-November. Third, last week’s disappointing economic numbers raised hopes that the Federal Reserve will cut interest rates again on October 30.

Still, even with some weak data, unemployment still dropped more than expected a 50-year low of 3.5 percent.

Apple (AAPL) chart with select moving averages.
Apple (AAPL) chart with select moving averages.

Apple Lifts Technology Stocks

Technology stocks were the best performers last week as sector leader Apple (AAPL) closed at its highest level in a year. A news report from Japan mentioned strong demand for iPhone 11 components. It seemed to cover lower-priced handsets, an indication Tim Cook’s new pricing strategy could be working.

Chinese Internet stocks, semiconductors and software makers were other outperformers within tech. Housing names, gold miners and solar energy also gained last week.

Home builder Lennar (LEN) led the S&P 500 at the company level, up 9 percent. Spice company McCormick (MKC) was close behind. Both had strong earnings.

Energy found itself at the bottom of the totem pole as the usual problems returned: too much supply and too little demand. Transports, banks and industrials declined, as well.

S&P 500 with potential ascending triangles and select moving averages.
S&P 500 with potential ascending triangles and select moving averages.

China and the Fed

While last week’s swings were violent, they caused little technical damage to the chart. The S&P 500 managed to close back above 2950 and its 50-day moving average. Some technicians may also spot an ascending triangle, a potentially bullish pattern.

Is a breakout coming? Progress with China is the catalyst to watch. Traders may want to keep an eye out for news of a deal between President Trump and Vice Premier Liu He. The timing is unclear, but the White House has indicated a meeting will occur this week.

There are plenty of other things going on, including appearances by Fed Chair Jerome Powell the next three sessions. Several other central bankers speak throughout the week.

Tuesday brings producer prices. Wednesday has crude-oil inventories in the morning and minutes from the last Fed meeting in the afternoon.

Thursday’s big items are initial jobless claims and consumer-price inflation. Consumer sentiment wraps up the week on Friday.

Next week marks the start of earnings season, beginning with major banks.

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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.