Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 01/10” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
Primarily driven by optimism around a potential trade deal between the U.S. and China and FOMC minutes indicating that the central bank might take a cautious approach before hiking rates further, the S&P 500 index logged its longest winning streak of four consecutive sessions since September. Optimism, however, remained capped amid the ongoing political drama with the partial government shutdown now entering its 19th day, the second-longest government shutdown in 40 years.
Opening higher, the index took a sharp leg lower, briefly entering into a negative territory following reports that President Trump walked out of a meeting with Congressional leaders while discussing the government shutdown. A rally in Energy stocks, however, helped lift the index to register the day’s high at 2595.32. Seven out of the eleven primary sectors closed the session higher in today’s choppy session, with Energy and Technology sectors leading the advances. Defensive stocks under performed alongside rising Treasury yields.
THE DETAILS (The “How & Why”):
Oil prices surged for the eighth straight session in a row following a reassurance of production cut by Saudi Arabia, shrugging aside an EIA (Energy Information Administration) report of a big surge in fuel stockpiles. Energy was the best performing sector, up 1.50%, led by a 5.11% rise in Apache Corp.
Semiconductor and chip stocks bounced back from previous session’s slump to lead the broader Technology sector higher by 1.24%. Lam Research Corp, Micron Technology Inc. and Broadcom Corp were the top gainers within the sector, rising 5.16%, 5.04% and 4.32%, respectively. Apple Inc. also rose 1.70% on reports that it plans to cut iPhone production by 10% this quarter.
The keenly awaited release of the December FOMC minutes reiterated last week’s Jerome Powell’s dovish signals that the central bank will take a cautious approach towards further rate hikes. The 10-year Treasury yield edged higher to settle at 2.712%, to benefit the broader Financials sector to close higher by 0.52%. JP Morgan Chase & Co, Goldman Sachs and American Express are among the major banks that are set to kick start the fourth-quarter earnings season next week.
Airline stocks were the strongest performers within the Industrials space, lifting the sector modestly higher by 0.63%. American Airline Group Inc., Southwest Airlines Company and Alaska Air Group Inc. and Delta Air Lines Inc. gained 3.08%, 3.24% and 2.52%, respectively.
Among the other notable gainers were Industrials, Health Care and Consumer Discretionary sectors, up 0.63%, 0.32% and 0.46%, respectively. Lennar Corp was the top gainer of the session, soaring 7.93% on beating fourth quarter earnings estimates. The home-builder also hinted at improving home sales in the coming year as interest rates ease, boosting other home-builder stocks.
Limiting the day’s gains were weakness in defensive stocks as yields continued edging higher. Consumer Staples, Utilities and Real Estate all closed the session lower by 0.97%, 0.65% and 0.43% respectively. Constellation Brands led the broader Consumer Staples sector lower, tumbling 12.42% on reporting a disappointing outlook for the fiscal 2019.