Market Insights

Another major sector is breaking out as stocks keep climbing a wall of worry.

Utilities ended last week by jumping above their previous peak from late November. They joined other sectors like industrials, technology, financials and communications to make all-time highs after trade wars started hammering the market in late February.

The breakout highlighted some important trends. First is increased demand for electricity because of AI. (The tech investment has also supported fields like engineering, construction and industrial equipment.) That data-center boom has also helped keep the economy out of recession despite tariff anxiety and weak consumption.

Second is the continuing emergence of positive news in the face of gloomy sentiment. Less than 40 percent of respondents in the American Association of Individual Investors’ (AAII) regular poll were bullish last week — despite the S&P 500 and Nasdaq-100 pushing to new highs. The National Association of Active Investment Managers (NAAIM) also reported a drop in market exposure this month. Are investors still nervous about committing to stocks? Is idle cash on sidelines keeping pullbacks shallow? Are stocks climbing another wall of worry?

Third, utilities can be sensitive to interest rates. They often struggle when borrowing costs rise and climb when the Federal Reserve eases. Last week’s surge in utility stocks occurred at a key time for interest rates, with increased tension between the White House and the central bank.

S&P Utilities Select Index ($SIXU.X), daily chart.

Trump vs Powell

CBS News reported President Trump may fire Fed Chairman Jerome Powell for not cutting rates. That pushed up bond yields and the price of gold before White House issued a denial. Economic data showed modest progress on inflation, while retail sales and jobless claims suggested a recession may be unlikely.

Treasury yields climbed slightly, but ended the week below their highs. CME’s FedWatch tool also showed little change in interest-rate expectations. Given the breakout in utilities, that may show the market is calming before a potential rate cut on September 17. (FedWatch showed a 58 percent probability last week.)

There could be another big catalyst tomorrow, with Powell scheduled to speak at 8:30 a.m. ET. After that, attention will likely turn to the growing stream of quarterly earnings reports.

Software Comes to Life

All told, the broader S&P 500 rose 0.6 percent between Friday, July 11, and Friday, July 18. It was the third positive week in the last four. It was also the fourth straight week with a new record high.

Software companies rose the most since mid-May on broad buying. Autodesk (ADSK) rallied with investors relieved it wouldn’t acquire PTC (PTC) as Bloomberg News reported earlier. Oracle (ORCL) received a bullish initiation from Scotiabank.

Aside from those headlines, software companies seemed to play catchup after weeks of lagging semiconductors.

Speaking of chipmakers, they benefited from the Trump Administration allowing Nvidia (NVDA) to export H20 AI circuits to China.

That news also boosted Chinese stocks in general. Could they continue to gain traction on hopes that relations between Washington and Beijing are finally calming?

Energy was the sector with the biggest decline last week. OPEC+ plans to increase oil production next month, with another potential boost in September (according to a Reuters report on July 7.)

Gold miners, the top-performing industry this year, also struggled. That may suggest tariff fears are easing. It could also be consistent with a view that the U.S. economy will avoid recession and aggressive interest-rate cuts.

Health care continued to struggle, contributing four of the five biggest decliners in the S&P 500 (see below).

Block Joins the Index

Another big move occurred Friday afternoon, when Block (XYZ) was added to the S&P. Block, formerly known as Square, is a fintech company run by Jack Dorsey.

It’s also noteworthy that the last three index changes resulted from takeovers. XYZ replaces Hess (HES), which is being acquired by Chevron (CVX). The Trade Desk (TTD) and Datadog (DDOG) followed the takeovers of Ansys and Juniper Networks, respectively.

Invesco (IVZ) was the biggest gainer in the S&P 500 last week after announcing plans to restructure its QQQ Trust (QQQ), which tracks the Nasdaq-100.

Albemarle (ALB) rose after China moved to reduce lithium production. The heavily shorted company is still down more than 65 percent in the last two years.

Coinbase Global (COIN) continued to rally after Congress passed two important cryptocurrency bills.

Obamacare Fallout

Health insurers Centene (CNC), Molina Healthcare (MOH) and Elevance Health (ELV) were the S&P 500’s biggest decliners last week. All three do business with Obamacare health exchanges, where costs are rising as more people seek care. Lower enrollments have also reduced expected income from government subsidies.

Waters (WAT) had its biggest weekly drop since 2008, according to TradeStation data. The medical-testing company announced a merger with a unit of Becton, Dickinson (BDX). The deal raised concerns about a successful execution. Wells Fargo downgraded the stock to equal weight and slashed its target price from $420 to $330.

Charting the Market

The S&P 500 has continued to hit new highs without significant bearish patterns.

It fell last Wednesday, but held the previous week’s low of 6,201. That kind of price action, with support emerging at recent lows, may reflect a lack of selling pressure.

The index has also followed its rising 8-day exponential moving average higher — a potential sign of bullish momentum.

Next, the nine-day rate of change has remained positive. That also shows pullbacks remaining limited.

S&P 500, daily chart, with select patterns and indicators.

The Week Ahead

Earnings reports intensify this week, with more than one-fifth of the S&P 500’s issuing results. Chairman Powell’s speech tomorrow morning could also have a big impact.

Verizon Communications (VZ) issues numbers before the opening bell today.

Powell speaks at 8:30 a.m. ET on Tuesday. Results are due from companies including General Motors (GM), Coca-Cola (KO) and Texas Instruments (TXN).

Wednesday brings crude oil inventories and existing home sales. Alphabet (GOOGL), Tesla (TSLA), International Business Machines (IBM) and ServiceNow (NOW) report earnings in the post-market.

Thursday features initial jobless claims, new homes sales and a European Central Bank meeting. American Airlines (AAL) and Intel (INTC) issue results.

Durable-goods orders are on Friday morning.