Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 01/28” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
Stream of strong earnings continued throughout the week lifting the index higher and to recover from the slump experienced earlier in the week. Shrugging aside the trade concerns and fears of a global economic slowdown that weighed down on the index early in the week, investors remained focused on the latest batch of better-than-expected results delivered by major companies from across Technology and Industrial sectors.
The S&P 500 index gapped up at the open on reports that the Federal Reserve might slow the winding-down process of its bond portfolio. Semiconductor stocks continued rallying higher despite a weaker-than-expected result by the chipmaker giant Intel Corp. Maintaining a steady momentum of gains while trading within a tight range, the index closed off of session highs at 2664.76, up 22.43 points and gaining a modest 0.85% over previous session’s close.
Materials and Technology sectors outperformed to outweigh weakness in Utilities and Consumer Staples sectors. Confidence, however, remained capped this week amid several geopolitical and trade concerns looming in the background. Still facing a strong resistance at 2675 but regaining support of the key technical level of 50 DMA (now at 2613.88), the index ended its 4-week winning streak, closing the week 0.22% lower.
THE DETAILS (The “How & Why”):
Materials sector was the best performer of the session, broadly closing higher by 1.92%. Gold prices surged to a seven-month high on the back of a weakening dollar and a dovish Federal Reserve, boosting gold miners’ stocks. Freeport McMoRan Inc. also rebounded from its previous session’s slump following disappointing results, jumping 5.05% to lead the broader Materials sector.
Technology sector was the best performer this week, up 2.51% led by a solid rally in semiconductor stocks. Leading the index for the second straight day, the sector closed the Friday’s session higher by 1.45%. Intel Corp was the only decliner within the sector, tumbling 5.47% in its worst day in nearly six months. Despite missing revenue estimates and issuing a weaker guidance, this chipmaker giant did not fade the semiconductor rally.
Western Digital Corp, Seagate Technology PLC and Micron Technology Inc. were the top gainers of the session, rising 7.52%, 6.57% and 6.48%, respectively. FAANG stocks also traded broadly higher for the day, lifting the Communication Services sector higher by 1.01%. Key tech companies including Amazon.com Inc., Apple Inc., Microsoft Corp and Facebook Inc. are due to release their quarterly results next week.
Industrials sector outperformed the broader index, up 1.29% led by a 4.33% jump in General Electric Company ahead of the earnings release of this struggling industrial conglomerate. While transportation and airline stocks extended gains, Alaska Air Group Inc. fell 3.50% on missing earnings estimates.
Among the other notable gainers of the session were Energy and Real Estate sectors, up 1.18% each. Consumer Discretionary and Financials sectors also closed the session higher by 1.05% and 0.86% respectively. Treasury yields settled higher after President Trump announced a deal with the lawmakers to reopen the government for three weeks, temporarily ending a 35-day partial government shutdown. With yields edging higher, bond proxy Utilities and Consumer Staples sectors shed 1.33% and 0.24%, respectively to cap the gains within the broader index.
Market reaction to President Trump’s announcement of temporarily ending the partial government shutdown was mostly muted as investors focused on corporate earnings and the outlook provided by these companies to take cues about the health of the economy. Stream of corporate earnings will continue next week with major technology companies and biotech companies releasing their results.
Investors will also be keenly looking forward to the Federal Reserve’s policy meeting expecting the central bank to keep the benchmark interest-rate unchanged for now. Besides earnings and FOMC, key economic data including Jobs data, Consumer Confidence and Consumer Spending Index will also be a key focus due next week.