Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 05/22” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
Temporary relief of U.S. restrictions on Huawei sparked a relief rally within the beaten-down technology stocks, helping the S&P 500 index to rebound from previous session’s Tech-led slump. Disappointing retail earnings, however, kept the gains capped.
Late Monday reports that the Trump administration has provided a 90-day exemption from trade restrictions on Chinese telecom giant Huawei provided a solid boost to the index at the open. Maintaining gains and whipsawing within a relatively narrow range, the index closed near session highs at 2864.36, up 24.13 points and gaining a decent 0.85% over previous session’s close. Except Consumer Staples, all the other ten primary sectors closed modestly higher with Technology stocks leading the gains.
THE DETAILS (The “How & Why”):
Blue-chip technology and chipmaker stocks staged a rebound from previous session’s slump after the Trump administration gave a partial reprieve to Huawei Technologies Inc., the Chinese telecom giant that has been caught between crosshairs in US – China trade dispute. Keysight Technologies Inc., Qualcomm Inc. and Broadcom Inc. all bounced back more than 1% each after leading the index lower in previous session.
NVIDIA Corp, Intel Corp., Micron Technology Inc. and Advanced Micro Devices all gained more than 2% each. Apple Inc. and Google parent Alphabet Inc. also closed higher by 1.92% and 0.85%, respectively. Materials, Industrials and Communication Services, the sectors vulnerable to US – China trade tensions were the other major gainer in today’s relief rally, closing higher by 1.51%, 1.18% and 0.96%.
Treasury yields inched higher ahead of the release of key economic data and minutes from Fed’s latest policy meeting. The 10-year Treasury yield settled at 2.43%, benefiting banks and financial stocks by 0.86%. Defensive sectors lagged the broader index alongside rising yields. Consumer Staples was the only sector to not participate in broad-based gains, closing the session lower by 0.31%.
Meanwhile, disappointing retail earnings also limited the gains within the broader index. Kohl’s Corp was the worst decliner of the session, plunging 12.34% after the department store retail chain missed revenue estimates on the back of rising competition from online rivals and discount chains. Nordstrom Inc. tumbled more than 9% during the after-hours trading on reporting surprisingly weaker-than-expected first quarter revenue and earnings while slashing full fiscal year guidance.