Market Insights

Stocks kept testing a key resistance level last week amid signs of a potential economic slowdown.

The S&P 500 rose 0.4 percent between Friday, February 22, and Friday, March 1. That helped deliver a 3 percent gain for February. It was also the ninth positive week in the last 10.

The index is pushing against 2800, the same level where it slammed into a wall of selling in early December. Is there enough demand for stocks to trigger a breakout? Or, is it time for a pullback following a 19 percent rally since Christmas?

Investors need to parse some conflicting information to answer those questions. Pessimists might point to negative headlines like the Institute for Supply Management’s manufacturing report, which fell more than expected to the lowest level since November 2016. They might add that jobless claims keep rising and we’ve run out of corporate earnings as a bullish catalyst.

Optimists, on the other hand, could say that better-than-expected consumer confidence showed the U.S. is bouncing back from the recent government shutdown. They might also point to the Federal Reserve’s increasingly dovish stance, highlighted by Chairman Jerome Powell in the Senate last week.

On top of all that are hopes the U.S. and China will reach a trade deal soon.

Biotech’s Urge to Merge

Merger activity is another story in the background. Last week saw two more deals in the biotech space, with Germany’s Roche gobbling up Spark Therapeutics (ONCE) and Danaher (DHR) buying General Electric’s (GE) life-sciences division. That pushed biotech to the top of the industry performance rankings.

Retailers followed thanks to surprisingly positive news at the company level. Gap (GPS), for instance, surged 19 percent on news it would spin off its better-performing Old Navy division. That made GPS the top gainer in the S&P 500.

Best Buy (BBY) also rallied 12 percent after crushing estimates and pledging to return more capital to shareholders. There were also decent rallies in Foot Locker (FL), Nordstrom (JWN) and J.C. Penney (JCP).

Technology was the best performing major sector overall, up a little more than 1 percent. Interestingly, less prominent companies like Arista Networks (ANET) and PayPal (PYPL) led the charge while biggies like Nvidia (NVDA) and Facebook (FB) drifted.

HP, Booking Drop on Weak Results

Or, even worse they cratered like HP (HPQ) and Booking (BKNG). HPQ had the biggest drop in the S&P 500 last week, down 17 percent, after a poor earnings report showed an over-reliance on brick-and-mortar outlets. BKNG, formerly known as Priceline, dropped 10 percent on another disappointing report. That made it the third-biggest decliner in the index.

Sandwiched between the two was drugmaker Mylan (MYL), down 12 percent on a bleak profit outlook.

The worst-performing broad sectors last week were materials, home builders and airlines.

This coming week features important monthly jobs data and a handful of earnings.

Tonight’s big name is software maker Salesforce.com (CRM).

Tomorrow brings retailers Target (TGT) and Kohl’s (KSS), along with new-home sales and the Institute for Supply Management’s service-sector index.

ADP’s private-sector payrolls report leads the charge on Wednesday. Crude oil inventories and the Fed’s Beige Book economic survey are also due.

Initial jobless claims are due Thursday morning, and Chinese trade data in the evening could also grab attention.

The week concludes with the Labor Department’s non-farm payrolls report Friday morning.