Market Insights

Stocks just had their worst week since August as China’s coronavirus spread and investors took profits after months of steady gains.

The S&P 500 declined 1.03 percent between Friday, January 17, and Friday, January 24. Energy and global indexes led the selling, while safe-havens like bonds and gold rallied. Cboe’s Volatility Index ($VIX.X), the so-called “fear index,” closed at its highest level of the year.

The spread of coronavirus is discouraging travel and spurring fears of slower growth. It comes at a time when stocks had already surged on optimism about global trade. A big question for investors is whether the outbreak will be a lasting crisis, or simply provide a buyable pullback.

Another big question is energy, which already faced a supply glut. Throw in coronavirus, and the sector had its biggest weekly drop since May. Chart watchers may notice that both the SPDR Energy ETF (XLE) and crude oil (@CL) have held their ground since major drops in 2014 and 2015. Will they hold, or could we see another major leg to the downside?

Chinese Stocks Hammered

Not surprisingly, Chinese stocks fell sharply last week. However, they had been rallying on hopes of better trade relations with the U.S. Companies like Alibaba (BABA), Nio (NIO) and Luckin Coffee (LK) have drawn attention lately. Will those same buyers seek opportunities to add on weakness?

Copper also had its biggest weekly drop in six years. It’s very similar to oil, with high inventories and fears that coronavirus will hurt economic growth. Freeport McMoRan (FCX) is the most actively name in that sector — especially for traders looking to position for moves with options.

Safe havens, on the other hand, advanced last week. Utilities rose 2 percent and real-estate investment trusts gained 1 percent. Gold miners climbed almost 3 percent.

Housing Breaks Out

Despite all the negativity last week, price action remained strong in housing. A combination of low interest rates, tight inventories and years of rising incomes are triggering a rush for dwellings. Just last week, existing home sales rose more than expected and the National Association of Realtors said the supply of houses hit the lowest level since at least 1982.

That pushed the iShares U.S. Home Construction ETF (ITB) decisively above its peak from early 2018. ITB hasn’t been this high since early 2006 — before the subprime crash.

At the company level, Intel (INTC) had the biggest gain in the S&P 500 last week. The chip giant surged 15 percent after a surprisingly strong quarterly report. Remember semiconductors are one of the healthiest corners of the global economy now, especially with the planned growth of 5G networking.

Citrix Systems (CTXS) followed with a 9 percent pop after earnings and revenue beat estimates.

Energy company Cabot Oil & Gas (COG) had the biggest decline in the S&P 500 last week, down 13 percent. Fertilizer stocks Mosaic (MOS) and CF Industries (CF) fell 12 percent each.

Apple, Facebook and the Fed

This coming week is packed with important earnings and economic events.

Today features new home sales, plus results from builder D.R. Horton (DHI).

Durable-goods orders are due Tuesday. Pfizer (PFE) and 3M (MMM) issue results in the premarket. Technology giant Apple (AAPL) reports after the close, along with Advanced Micro Devices (AMD), eBay (EBAY) and Starbucks (SBUX).

Wednesday has pending home sales and oil inventories in the morning. The Federal Reserve issues its interest-rate announcement and holds a press conference in the afternoon.

The earnings lineup includes Facebook (FB), Tesla (TSLA), Microsoft (MSFT), Mastercard (MA), Paypal (PYPL), Boeing (BA), General Electric (GE), McDonald’s (MCD) and Lam Research (LRCX).

Thursday has another big economic number: the initial reading of fourth-quarter gross domestic product. Initial jobless claims are also due, along with results from Amazon.com (AMZN), Coca-Cola (KO), Amgen (AMGN), Electronic Arts (EA), Eli Lilly (LLY) and United Parcel Service (UPS).

Personal income and spending round things out Friday morning. Caterpillar (CAT), Honeywell (HON), Exxon Mobil (XOM) and Chevron (CVX) report earnings.