Stocks Are Back to This Major Level. Here’s What to Watch Next

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Stocks are back to key levels as the market looks for the worst economic crisis since the Great Depression to fade.

The S&P 500 rose 3 percent between Friday, April 10, and Friday, April 17. The index closed above its 50-day moving average for the first time since the coronavirus correction began in late February.

Buyers looked past some of the worst data in history. Retail sales, plus regional manufacturing numbers in New York and Philadelphia, had record drops. Industrial production shrank at the fastest rate since 1946, while jobless claims continued to skyrocket.

But the market’s always forward looking, and may have priced in the worst of that news a few weeks ago. Now investors are more optimistic as President Trump pushes for the economy to open. Congress is also expected to pass more economic stimulus tomorrow. Most of the money will subsidize small businesses for keeping employees.

S&P 500, daily chart, with 50-day moving average and October 2019 level.
S&P 500, daily chart, with 50-day moving average and October 2019 level.

This morning’s collapse in crude oil prices is a potential challenge for the bulls. Caused by a supply glut after people stopped driving and flying, expiration of May futures contracts this week has worsened the selling pressure.

Can Anything Stop Netflix?

Another big event Tuesday is Netflix’s (NFLX) earnings report after the closing bell. Did you know the streaming-video company has finally broken out to new highs as stay-at-home orders added a new wave of subscribers? That made NFLX one of the top performing members of the S&P 500 last week.

The other big gainers all had something to do with coronavirus. Advanced Micro Devices (AMD) is positioned in fast-growing areas like video-gaming and data centers. Amazon.com (AMZN), another obvious beneficiary of social-distancing, broke out to new highs.

Biggest Gainers in S&P 500 Last Week
Advanced Micro Devices (AMD)+17%
Amazon.com (AMZN)+16%
Incyte (INCY)+15%
Gilead Sciences (GILD)+14%
Netflix (NFLX)+14%

Biotechnology firms Incyte (INCY) and Gilead Sciences (GILD) both surged on hopes of them developing treatments for Covid-19. All told, biotechs were the single-best performing industry group last week.

A handful of other growth stocks outside the S&P 500 also stood out. Shopify (SHOP), sometimes viewed as “the next Amazon,” had its biggest weekly gain ever — up 41 percent.

Streaming-video upstart Roku (ROKU) climbed 37 percent on signs that it benefited from viewers being locked at home. Tesla (TSLA) also bounced 32 percent. Despite having a larger market capitalization than nine-tenths of the S&P 500’s members, TSLA still isn’t in the index.

Zoom Video Technologies (ZM), another coronavirus beneficiary, climbed 20 percent as well.

Charting the Markets

The S&P 500 has returned to last October support levels around 2875. It’s the same level the index held before the trade deal with China. Will buyers pause here again, waiting for confirmation that the outbreak is easing?

Perhaps more importantly, will they stick with the same companies? The Russell 2000 small-cap index had a “limit up” rally last Thursday night after Trump talked about reopening the economy. Banks, hammered by a spike in delinquent loans, also jumped.

That may be a sign of interest in non-tech companies most battered by the crisis. Given their sensitivity to the economy, will investors nibble as states reduce social-distancing rules? Boeing (BA) could be a big name to watch — especially as it resumes production at factories in Washington and Pennsylvania.

Boeing (BA), weekly chart, showing key events and last week’s potentially bullish inside candle.

Earnings Season Gets Going

Earnings are the other big story this week, while economic data is light.

Halliburton (HAL) reports this morning. International Business Machines (IBM) is due in the afternoon.

Coca-Cola (KO) and existing home sales come out tomorrow morning. Results from NFLX, Chipotle Mexican Grill (CMG), Texas Instruments (TXN) and Snap (SNAP) follow in the post market.

Biggest Decliners in S&P 500 Last Week
Simon Property Group (SPG)-18%
Kimco (KIM)-18%
Wells Fargo (WFC)-15%
Southwest Airlines (LUV)-14%
Comerica (CMA)-14%

Wednesday features crude-oil inventories, plus numbers from Delta Airlines (DAL), AT&T (T), Lam Research (LRCX) and Las Vegas Sands (LVS).

Initial jobless claims and new home sales are due Thursday. Intel (INTC) and Eli Lilly (LLY) are the big earnings reports.

The week wraps up Friday morning with durable-goods orders, American Express (AXP) and Verizon Communications (VZ).

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