Market Insights

Stocks remain under pressure as the trade war against China worsens.

The S&P 500 was positive for most of last week, but then came a quick succession of events on Friday morning. First, Beijing imposed tariffs on an additional $75 billion of U.S. products. President Trump quickly responded by ordering U.S. companies “to immediately start looking for an alternative to China” as a supplier.

The S&P 500 immediately turned lower and ended the period between Friday, August 15, and Friday, August 23, down 1.4 percent. It was the fourth straight losing week, and the fifth negative return in the last six. Economically sensitive transportation stocks fell more than twice as much.

Other economic news paled in comparison to the trade war. Federal Reserve Chairman Jerome Powell seemed to confirm expectations for another rate cut next month. Initial jobless claims painted a strong picture of the labor market and housing numbers were mixed. There was growing chatter about a recession in Germany.

S&P 500 in a Range

The S&P 500 has bounced between 2825 and 2940 all month. It’s also consolidating below its 50-day moving average. Is a test of the 200-day moving average in the cards next?

Materials stocks like fertilizers and chemicals were the worst-performing sector last week. That’s not a surprise because they typically follow expectations about the global economy. Energy slid for similar reasons. Banks and financials struggled as the yield curve inverted again.

But that same story — lower interest rates — helped lift housing stocks. Gold miners benefited from the economic and trade anxieties. Software makers and utilities also gained.

Meanwhile, sellers targeted companies with heavy exposure to China like Apple (AAPL), Nike (NKE) and Caterpillar (CAT).

Target Hits the Mark

Target (TGT) was the S&P 500’s best performer last week, up 23 percent. The big-box retailer broke over $100 for the first time ever on signs its digital transformation is working. Nordstrom (JWN) and Lowe’s (LOW) followed with gains of about 13 percent each.

Department-store operator JWN rallied after its quarterly results gave investors some hope it will avoid an inventory glut and adapt to the new economy. LOW benefited from strong margins and demand from contractors.

But then you had L Brands (LB), falling 14 percent to its lowest level of the decade. Strong demand for Victoria’s Secret led the stock to triple digits earlier in the decade. Now weakness at the same store has dragged LB all the way back below $20.

General Electric (GE) was the second-worst performer in the S&P 500 last week, down 9 percent. That followed disputes about the company’s accounting earlier in the month.

Dog Days of Summer at Hand

The current week, immediately before Labor Day, is often one of the quietest in the year because of summer vacations. Still there are some important economic reports and possibly more news on the trade war against China.

Durable-goods orders are due this morning, followed by consumer confidence tomorrow. Autodesk (ADSK) also issues results Tuesday afternoon. Wednesday brings crude-oil inventories.

Thursday’s the busiest day, with revised gross domestic product, jobless claims and pending home sales. Personal income and spending wrap things up Friday, before the long three-day weekend.