Market Insights

Stocks extended their longest losing streak of the year as trade fears worsened, but held a key level as investors adapted to the uncertainty.

The S&P 500 slipped 1.2 percent between Friday, May 17, and Friday, May 24 — its third straight weekly decline. Perhaps more importantly the index continued to hold support above the same 2800 level that’s been key support and resistance for more than a year.

China and the U.S. exchanged more blows on the trade front. Beijing complained about getting bullied, hinted at a boycott of Apple (AAPL) and pledged to stand tall against Washington’s “bad actions.” The Trump Administration responded with further criticism of blacklisted Chinese tech giant Huawei and threatening to ban a second firm.

Meanwhile, U.S. investors are starting to accept that the impasse will last longer than hoped. One response has been to grudgingly shift money from glamorous technology stocks into boring parts of the market.

Just look at the main sectors to advance last week: Utilities ripped 2 percent to new all-time highs. Ditto for real-estate investment trusts. Health-care was another winner, rising 1.5 percent as investors returned to the traditional safe haven after a an intense April selloff.

Risk-on sectors like energy, technology, retailers, transports and small-caps were just the opposite. Energy led the carnage as rising inventories and falling economic growth estimates hammered crude oil.

Technology was the victim of China fears and weak earnings. Semiconductors, in particular, took it on the chin. Poor results also punished retailers.

Foot Locker Gets Stomped

Foot Locker (FL) was the single worst-performing member of the S&P 500, down 20 percent after earnings, sales and comps missed estimates. Management also warned tariffs could squeeze profit margins.

Kohl’s (KSS) had the second biggest drop, also on a weak quarter. On a related note, fellow department store operator J.C. Penney (JCP) slipped back under $1. (JCP was dropped from the S&P 500 in December 2013.)

Target (TGT) and L Brands (LB), on the other hand, were the index’s top gainers. TGT surged 15 percent on the week as the retailer overhauls its business to survive in the new digital economy. LB rose 11 percent after growth at Bath & Body Works offset weakness at Victoria’s Secret.

Tesla (TSLA) was another important mover (but outside the S&P 500). Elon Musk’s electric-car maker fell 10 percent to its lowest level since December 2016. Debt worries and doubts about end-market demand for its products are the main problems.

Will Interest Rates Ever Go Up Again?

Trade tensions with China also pushed interest rates to their lowest level in 1-1/2 years. Weak durable-goods orders and dovish minutes from the Federal Reserve’s last meeting added to the drop.

The U.S. economy also had good news. New-home sales for April missed estimates by a narrow margin, but the report was viewed positively because of a massive upward revision for March. Despite rising costs for builders like Toll Brothers (TOL), housing seems to continue its long recovery. Initial jobless claims also fell more than expected.

There were also headlines overseas. European economic data was mostly weak, but Theresa May’s resignation as Britain’s Prime Minister spurred hopes of a Brexit resolution. Pro-business politicians also won victories in India and Australia.

A Quiet Holiday Week

This week is pretty quiet, with only four trading sessions because of Memorial Day.

Today’s main economic report is consumer confidence. Tomorrow afternoon features earnings from Palo Alto Networks (PANW) and apparel firm PVH (PVH).

Thursday’s the busiest session with revised gross domestic product for the first quarter and initial jobless claims. Oil inventories are also due, one day later than usual because of the holiday.

Dollar General (DG) and Dollar Tree (DLTR) report in the premarket. Costco (COST), Marvell Technology (MRVL), and Gap (GPS) follow after the closing bell.

The week concludes with personal income and spending. The American Society of Clinical Oncology (ASCO) also launches begins its annual conference, which is often a big event for biotechnology stocks.