Market Insights

Stocks failed to break out last week as investors keep worrying about major global events like trade and Brexit.

The S&P 500 rose 0.5 percent between Friday, October 11, and Friday, October 18. Still, it hit resistance at the psychologically important 3,000 level and seems to be forming a triangle as the market waits for more information on the European Union, tariffs, corporate results and the economy.

There was also significant rotation between sectors as money flowed into financials and healthcare. Both have been laggards this year. Investors also sold technology stocks — especially software makers.

Banks kicked off third-quarter earnings season on a strong foot, bolstered by increased consumer borrowing. The pace of companies announcing results will now accelerate through the end of the month as big names like Microsoft (MSFT), Apple (AAPL), Amazon.com (AMZN) and Facebook (FB) report.

Economic Data Not So Hot

Last week’s economic data continued to paint a picture of slowing growth. U.S. Retail sales missed estimates and Chinese gross domestic product had its worst quarter in 27 years.

However, the big stories now are geopolitical. It’s not clear how much of a trade agreement President Trump has with China, especially with more tariffs looming in December. Britain faced even more uncertainty with Prime Minister Boris Johnson trying to push a Brexit deal through Parliament over the weekend. The outcome of the vote could loom large today.

Investors have taken refuge in cash amid the uncertainty. That wait-and-see mindset seems to be causing a triangle on the S&P 500, with the potential to break in either direction.

Technology Tumbles

It was a bad week for technology stocks. Software makers dropped about 4 percent as investors start to doubt their growth stories and balk at their high valuations. International Business Machines (IBM) also took a beating as its legacy businesses continued to shrink.

All told, the technology sector fell almost 1 percent. Health care was just the opposite amid reports that major drug distributors will settle opioid-abuse claims. Johnson & Johnson (JNJ) and UnitedHealth (UNH) also had better-than-expected results.

The question now is whether investors will view health-care stocks as bargains — especially if the economy remains sluggish. After all, they’re usually viewed as safe havens.

Homebuilders Keep Running

Homebuilders also gained almost 5 percent last week, closing at their highest level since early 2018. They’ve benefited from a growing realization that housing inventory is too low as the millennial generation enters its child-rearing years.

Banks rallied on strong earnings and as the yield curve steepened. Transports and small caps also rose last week. Energy struggled as the global oil glut worsened.

Overall, September’s trend of money shifting from growth stocks to value stocks seemed to continue. That generally favors industrials and financials, but is negative for technology.

This week is light on economic data but has plenty of earnings.

McDonald’s (MCD), Procter & Gamble (PG) and United Parcel (UPS) get the ball rolling tomorrow morning. Chipotle Mexican Grill (CMG), Snap (SNAP) and Texas Instruments (TXN) follow in the afternoon.

Microsoft, Amazon.com and Twitter

Wednesday features Microsoft (MSFT), Tesla (TSLA), Ford Motor (F), PayPal (PYPL) Boeing (BA), Caterpillar (CAT) and AT&T (T). Oil inventories are also due.

Thursday brings durable-goods orders, initial jobless claims and new-home sales. Amazon.com (AMZN), Twitter (TWTR), Intel (INTC), Comcast (CMCSA) and American Airlines (AAL) are some of the big earnings reports.

The week ends Friday morning with results from Verizon Communications (VZ).

Next week is super-active, with even more results and major economic events including a Federal Reserve meeting.