Stocks Reclaim Old Highs, Led by Breakouts in Apple and Tesla

Stocks Reclaim Old Highs, Led by Breakouts in Apple and Tesla

Stocks pushed back above their pre-Covid highs last week, with big technology companies like Apple and Tesla leading the charge.

The S&P 500 rose 0.7 percent between Friday, August 14, and Friday, August 21. It was the index’s fourth straight positive week, putting it on pace for a fifth consecutive winning month. The S&P 500 also closed at 3397, about 4 points above its previous high on February 19.

But the real stories, once again, were the Nasdaq-100 and technology. Apple (AAPL) soared 8 percent, lifting its valuation above $2 trillion for the first time ever. Tesla (TSLA) shares spiked 24 percent to close above $2,000. Both AAPL and TSLA will split their stocks later this week.

Most of the economic news matched recent trends. Residential real estate continues to benefit from low interest rates and a lack of inventory. Housing starts, building permits and existing home sales beat estimates by a wide margin. Homebuilder sentiment also hit a new record high thanks to strong selling conditions.

Most other parts of the economy are still crippled by coronavirus. Jobless claims unexpectedly rose back above 1 million and manufacturing in the Philadelphia area rebounded less than hoped.

Apple (AAPL), daily chart, with 50- and 200-day moving averages.

How Big Are Apple and Tesla Now?

It’s hard to overstate the dominance of big technology companies and the Nasdaq-100. TradeStation data shows AAPL adding $175 billion of market capitalization last week. TSLA grew about $74 billion.

Biggest Gainers in S&P 500 Last Week
L Brands (LB)+13%
Target (TGT)+13%
Nvidia (NVDA)+10%
Synopsys (SNPS)+8.6%
Apple (AAPL)+8.2%

AAPL’s increase matched the entire market cap of Exxon Mobil (XOM). TSLA’s gain is comparable to the value of Caterpillar (CAT). Both of those comparisons — XOM and CAT — are members of the Dow Jones Industrial Average!

Other important technology companies also rallied. Nvidia (NVDA), the high-flying designer of gaming and server chips, rallied 24 percent on the heels of a strong quarterly report. Zoom Video Communications (ZM) and (CRM) climbed as their earnings approach.

Energy, Financials Struggle

Housing was the strongest industry group overall last week. Chinese technology stocks, software and solar energy also led.

Other parts of the market that had briefly outperformed fell. Energy declined more than 5 percent. Financials, small-caps and airlines slid. That’s consistent with the recent pattern of strength in tech and housing, but weakness in cyclical companies hurt by the recession.

S&P 500, daily chart, with 50- and 200-day moving averages.

Two retailers were the biggest gainers in the S&P 500 last week on a percentage basis. L Brands (LB) jumped on plans to split Victoria’s Secret from Bath & Body Works. Target (TGT) rallied 13 percent to new highs after its long-term digital transformation paid off.

Kohl’s (KSS) found itself at the bottom of the rankings as it struggles to find a place in a world of social distancing and e-commerce. The department-store chain now has the third-smallest market cap in the S&P 500, ahead of only H&R Block (HRB) and Coty (COTY).

Biggest Decliners in S&P 500 Last Week
Kohl’s (KSS)-19%
Jack Henry (JKHY)-15%
Devon Energy (DVN)-14%
Diamondback Energy (FANG)-14%
TechnipFMC (FTI)-14%

Jerome Powell and the Fed

This week’s agenda features a big Federal Reserve conference. Some economists expect policymakers to adopt more aggressive measures to spur inflation. That could entail more monetary stimulus — potentially bullish for precious metals like gold and silver.

Today is quiet but tomorrow brings consumer confidence and quarterly results from Best Buy (BBY), CRM, Autodesk (ADSK) and Nordstrom (JWN).

Thursday’s the other big day. Initial jobless claims and revised gross domestic product for the second quarter are due early. Fed Chair Jerome Powell speaks at 9:10 a.m. ET. Dollar General (DG), Dollar Tree (DLTR), Ulta Salon (ULTA), Marvell Technology (MRVL), Gap (GPS), HP (HPQ) and Dell (DELL) report earnings as well.

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