Stocks Finally Pause as Mideast Tensions Flare

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Stocks Finally Pause as Mideast Tensions Flare

Stocks finally halted their advance as tensions in the Middle East gave the bulls something to worry about.

The S&P 500 managed to hit a new record high on Thursday, but finished the New Year-shortened week down 0.2 percent. It was only the second negative week since early October.

Most of the drop came on Friday after a U.S. drone killed an Iranian general in Baghdad. That not only drove up oil, it also reminded investors not to get complacent after October’s market breakout and steady advance.

There was a surge of money into Chinese technology stocks as the White House moved toward a trade deal with Beijing. Energy also rallied more than 1 percent along with crude oil prices. But most sectors fell, especially biotech and economically sensitive industries like materials.

S&P 500, daily chart, with 8-day exponential and 50-day simple moving average.
S&P 500, daily chart, with 8-day exponential and 50-day simple moving average.

Biggest Yearly Gain Since 2013

Last week marked the end of 2019, with the S&P 500 up 29 percent overall. It was the biggest yearly gain since 2013. The index also rose 2.9 percent in December, its fourth straight positive month. All told, stocks only had two negative months last year. Read our yearly review for more.

Other economic data last week was mixed. The Institute for Supply Management’s manufacturing index fell more than expected to its lowest level in over a decade. However, the report’s authors predicted a rebound after the China trade deal is signed on January 15.

Construction spending and jobless claims beat estimates. Oil inventories also fell more than forecast for the second straight week — another potentially bullish item for the commodity.

Crude oil futures (@CL), with 50- and 200-day moving averages.
Crude oil futures (@CL), with 50- and 200-day moving averages.

Job Data and Tech on the Agenda

Lamb Weston (LW) had the biggest gain in the S&P 500 last week. The food company rallied almost 9 percent on strong earnings. Occidental Petroleum (OXY) and defense contractor Northrup Grumman (NOC) followed with gains of more than 8 percent each.

This week will probably be more active as investors return from vacation. Some important economic data comes out and the annual Consumer Electronics Show (“CES 2020”) runs between Tuesday and Friday.

ISM’s services index and factory orders are the first economic reports tomorrow morning. Wednesday brings ADP’s private-sector payrolls report and crude-oil inventories. Walgreen Boots Alliance (WBA) and Lennar (LEN) report earnings as well.

Jobless claims are scheduled for Thursday. The week ends with non-farm payrolls on Friday morning.

Next week marks the beginning of earnings season as major financials like JPMorgan Chase (JPM) and Bank of America (BAC) issue results.

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