Market Insights

Stocks eased back from record highs last week as investors digested a string of earnings and economic news.

The S&P 500 declined 1.2 percent between Friday, July 12, and Friday, July 19. It was the biggest weekly drop since the end of May and came shortly after the index broke above the symbolic 3,000 level for the first time.

The mix of price action was bearish, with fewer than one-third of member stocks rising. Over half the major sectors declined at least 1 percent, led by communications and energy. Gold miners and chip companies were the primary gainers.

A variety of earnings, economic reports and central-bank headlines filled the news feeds. None had decisive importance.

Quarterly results, for instance, were mixed. Banks warned of pressure from interest rates, but otherwise were strong. Netflix (NFLX) cratered on weak subscriber growth, but Microsoft (MSFT) beat and semiconductors rose on hopes of the 5G investment cycle.

Fed Drama Continues

Investors came into the week expecting the Federal Reserve to cut interest rates on July 31. John Williams of the New York branch seemed to bolster that case on Thursday by endorsing “preventative measures” to avoid recessions. He then tried to walk back his comments after the market interpreted his speech as a pre-announcement for next week’s meeting.

However, outside the U.S., the drumbeat of low rates continued. Indonesia and South Korea both eased for the first time in over two years, while speculation grew for a European cut this Thursday. That depresses foreign currencies, pressuring the Fed to follow — even if domestic growth remains healthy.

And, it stayed healthy last week. Retail sales for June beat expectations as incomes rise and workers reenter the labor force. Regional manufacturing gauges from the Fed’s New York and Philadelphia branches shot higher as new orders recovered. A separate report for June also showed factory activity accelerating at the national level.

Housing was the weak spot, with housing starts and building permits falling more than expected. Is it time to stop hoping lower interest rates will help the industry?

Winners & Losers

NFLX had the biggest decline in the S&P 500 last week, down 16 percent, after the streaming-video giant unexpectedly lost U.S. viewers. The international number also missed by almost half. That begs the question: If NFLX is losing eyeballs now, what happens when competitors like Walt Disney (DIS) launch their services?

Symantec (SYMC) was second-worst, dropping 12 percent, after a proposed takeover by Broadcom (AVGO) fell through.

J.B. Hunt (JBHT) had the biggest gain in the index, rising 12 percent on a strong quarterly report. State Street (STT) was second-best, bouncing 9 percent from a long-term low.

Philip Morris (PM) followed with an 8 percent gain after its results suggested the maker of Marlboro has established a foothold in the vaping market.

5G networking was another story last week after Taiwan Semiconductor (TSM) and ASML (ASML) saw the new technology driving business in the second half. Talk is also starting a 5G upgrade cycle for the Apple (AAPL) iPhone. Watch for this story to develop into the holidays.

FANG Earnings

This week brings earnings for major technology stocks, especially members of the “FANG” group. There are also important economic headlines on Thursday and Friday.

Things get moving tomorrow morning with Coca-Cola (KO) numbers and existing home sales. Visa (V), Chipotle Mexican Grill (CMG) and Texas Instruments (TXN) follow after the closing bell.

Wednesday features Boeing (BA), Caterpillar (CAT) and United Parcel Service (UPS). New-home sales and oil inventories are also due. Facebook (FB), Intel (INTC), Tesla (TSLA) and PayPal (PYPL) report in the afternoon.

Thursday has the European Central Bank, initial jobless claims and durable-goods orders in the premarket. After the bell, you have Amazon.com (AMZN), Alphabet (GOOGL) and Starbucks (SBUX).

The week concludes with the first of three Commerce Department readings for second-quarter gross domestic product. Twitter (TWTR) and McDonald’s (MCD) also report.