Market Insights

Stocks just had their worst week of the year after President Trump renewed his trade war against China.

The S&P 500 lost 3.1 percent of its value between Friday, July 26, and Friday, August 2. It was the biggest drop since the week before Christmas and brought the index back to a potentially important support level. (See chart below.)

Most of decline came after midday on Thursday, when Trump announced plans to tax an additional $300 billion of Chinese goods. That was a reversal of an earlier position from June 28, which at the time propelled stocks to new record highs.

The news also distracted from other major items. The Federal Reserve cut interest rates for the first time in 11 years. It was the busiest week of second-quarter earnings season and some important economic numbers were released.

Technology Stocks Battered

Selling was widespread, dragging nine of the 11 key sectors lower.

Technology led to the downside as trade fears hammered chip makers. Retail and consumer stocks also fell because the new tariffs will impact a merchandise like shoes and electronics.

The main winners last week were safe haven utilities, real-estate investment trusts and gold miners. Solar energy ripped higher on signs of rising demand.

Last week’s news also pushed energy prices and interest rates downward. Crude oil had its biggest drop in years, while bond yields hit their lowest levels since Trump was elected President.

Economic Data Still Healthy

Despite the fears, economic data continued to reveal slow and steady growth. Reports from the Labor Department and ADP showed payrolls growing as expected. Consumer confidence also rose much more than forecast as Americans focused on their strong finances and job prospects. Manufacturing numbers were weaker.

Let’s take a look at the charts. The S&P 500 ended last week at 2932, its lowest close since June 27. The index is back to the same price area where it peaked last September and April. It also managed to hold its 50-day moving average. Was this the pullback investors needed?

Three obscure materials companies had the biggest gains in the S&P 500 last week. Corteva (CTVA), the fertilizer business spun off from DowDuPont, rose 10 percent. Martin Marietta Materials (MLM) and CF Industries (CF) were close behind amid strong earnings.

Losers Outnumber Winners

But there were a lot more losers than winners. Cardiac company Abiomed (ABMD) led to the downside, crashing almost 26 percent. Oil driller Concho Resources (CXO), data-storage company NetApp (NTAP), tech researcher Gartner (IT) and apparel stock Under Armour (UAA) rounded at the list with declines of at least 20 percent.

All told, decliners in the S&P 500 outnumbered winners by almost 4-to-1 last week.

The forward calendar is much quieter as investors prepare for the dog days of summer. Today’s main economic report is the Institute for Supply Management’s service-sector index.

Tomorrow features earnings from Walt Disney (DIS), Match (MTCH) and Discovery Communications (DISCA). Fed policymaker James Bullard will also speak.

Wednesday brings oil inventories and a speech by Charles Evans of the Fed. Roku (ROKU) issues quarterly results in the afternoon.

Initial jobless claims, plus earnings from Cronos (CRON) and Activision Blizzard (ATVI), are the main items Thursday.

The week ends with producer price-inflation data Friday morning.