WEEKLY RECAP SHOWS MATERIALS AND FINANCIALS LEADING MARKET HIGHER, WHILE TECHNOLOGY AND UTILITIES LAG BEHIND -- RECORD HIGH IN THE DOW MAY BE TIED TO EASING IN GLOBAL TENSIONS AND REBOUND IN FOREIGN CURRENCIES AND STOCKS

MATERIALS AND FINANCIALS LEAD, TECHS AND UTES LAG: The Dow and S&P 500 hit new records this past week, while the Nasdaq lost some ground. A rebound in chemicals and copper stocks made materials the weekly leader. Financials benefited from a jump in bond yields. That also explains why utilities were the weakest sector. Energy and industrials also had a strong week. A pullback in the dollar gave a boost to commodity prices, especially copper and crude oil; and favored large stocks over smaller ones which lost ground. Technology stocks weakened, while money rotated into stock sectors that had been lagging behind. A rebound in foreign stocks and currencies suggested that trade fears may be easing. Foreign markets had a strong week. And especially in China.

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Chart 1

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Chart 2

SHANGHAI STOCKS AND COPPER REBOUND TOGETHER... Falling Chinese stocks have been "ground zero" in the trade dispute between the U.S. and that country. Which is why this week's strong rebound in China is an encouraging sign that trade fears may be easing. Chart 1 (above) shows the Shanghai Stock Exchange Index climbing more than 4% this week to lead emerging markets higher. The Chinese yuan also gained ground, as did most emerging currencies, against the dollar. Chart 1 also shows the SSEC ending the week above its 50-day average (blue line) for the first time since May. Another positive sign came from a strong rebound in the price of copper. Chart 2 shows the key industrial metal jumping 8% for the strongest weekly gain in two years. Copper also regained its 50-day average and closed the week at the highest level in two months. China is the world's biggest importer of copper which is closely tied to developments in that country. Which is also why this week's climb in both markets is an encouraging sign for global stocks. Those easing of tensions may also explain why the trade-sensitive Dow Industrials had such a strong week.