Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
For the Outlook, Forecast, and Trading Plans published this morning, please click here
For the Results of the morning’s Trading Plans, please click here.
THE GIST (“THE WHAT”)
The S&P 500 index struggled for direction as escalating U.S.-EU trade jitters overshadowed the euphoria from a temporary trade truce between U.S. and China. In retaliation to the European Union’s subsidies to Airbus, the Trump administration threatened to levy tariffs on $4 billion worth of additional European goods, dampening investor sentiment.
Oscillating between gains and losses for most part of the early session, the index gained a strong upward momentum in the afternoon session. A strong rally in defensive sectors alongside sliding yields helped the index to register a yet another record high daily close at 2973.01, up 8.68 points and gaining 0.29% over previous session’s close. A sharp decline in Energy stocks capped the day’s gains on mounting concerns of falling demand for oil in the wake of slowing global economic growth.
THE DETAILS (The “How & Why”):
Treasury yields slid on revival of global economic growth concerns after the Bank of England Governor Mark Carney underscored the growing risks of trade wars and a no-deal Brexit. The 10-year Treasury yield fell below its 2% level once again, settling at its lowest level in two years at 1.979%. Investors piled up on high-dividend paying defensive stocks, lifting Real Estate and Utilities sectors broadly higher by 1.82% and 1.24%, respectively.
Communication Services and Consumer Staples were the other notable gainers of today’s choppy session, up 1.06% and 0.85%. The recently merged L3Harris Technologies was the top gainer of the session, extending optimism over the strategic merger between L3 Technologies and Harris Corporation to create a new defense giant. HCP Inc., a California-based REIT led the gains within Real Estate space, jumping 3.14%.
Energy sector was the biggest drag on the broader index, closing sharply lower by 1.74%. Apache Corp. and EOG Resources Inc. were the worst decliners of the session, tumbling 6.16% and 5.94%, respectively, alongside tumbling in oil prices. Marathon Oil Corp., Diamondback Energy Inc., Devon Energy Corp., Pioneer Natural Resources Co. and Concho Resources Inc. all fell more than 4% apiece.
Global oil price fell more than 5% to their lowest level in almost two weeks, approaching closer to a bear market territory as weakening demand concerns outweighed the effect of a production cut extension by OPEC and other trading partners led by Russia at their recently convened meeting.
Meanwhile, last session’s leaders were today’s laggards on the back of profit-taking. Technology sector underperformed the index, with semiconductor stocks declining the most after leading the index in yesterday’s relief rally. Xilinx Inc., Western Digital Corp. and NVIDIA Corp posted the worst declines, all falling more than 2% apiece. Qorvo Inc., Skyworks Solutions Inc., Microchip Technology and Micron Technology also shed more than 1% each.