Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Monday, 09/17” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
Technology rebound led the S&P 500 index higher to register its best week in two months, further fueled by trade optimism. A five-day winning streak lifted the index to near a striking distance away from the all-time highs it recorded on August 29, 2018.
Investors’ reaction to the mixed economic data at the session’s open was mostly muted. Registering small gains and losses during the early session, the index took a sharp leg lower, falling to session lows at 2895.77 following reports that President Trump intends to slap China with tariffs on $200 billion worth of goods, despite efforts from his top aides to resume negotiations for easing tensions between the two nations.
The index, however, rebounded as investors shrugged off the trade jitters, closing a choppy session mostly flat at 2904.98 (just 0.02 points below the level indicated by our intraday models to trade off of! Click here to read the full report), marginally higher by a 0.80 point, albeit with a weekly gain of 1.16%. Sector-wise, performance was mixed with Financials and Energy sectors offsetting some of the strong declines in defensive sectors.
THE DETAILS (The “How & Why”):
The 10-year Treasury yields spiked to reach the critically important 3% mark for the first time in six weeks following a mixed batch of economic data indicating that the economic growth continues to be robust enough for the Federal Reserve to follow through with two more rate hikes this year.
While the Retail sales in August rose at the smallest pace since February, the University of Michigan’s Consumer Sentiment Index climbed to 100.8, its highest level since March. Financial sector led the day’s advances with 0.66% gain on rising yields. However, it was the only sector to end the week lower by 0.35%.
Energy sector was one of the best performers this week, up 2.05% on a weekly basis as oil prices rose sharply on worries of tightening global supply as sanctions loom on Iranian oil. Investors also weighed in the impact of Hurricane Florence on the energy market. Rising oil prices lifted the broader Energy sector higher by 0.56% in today’s session.
Technology stocks closed the session relatively unchanged. Advanced Micro Devices Inc. bounced back from previous session’s slump, gaining 7.35% to be the best performer of the session, following a price target hike by an analyst at Argus.
As yields edged higher, interest-sensitive Real Estate, Utilities, Telecommunications and Consumer Staples were sharply lower for the day, losing 0.91%, 0.54%, 0.43% and 0.23%, respectively. Consumer Discretionary and Health Care were the other notable decliners, down 0.29% and 0.33%.
Retail stocks were among the worst performers of the session. While Kroger Inc. extended its slide on disappointing earnings, shedding further 2.73%, Costco Wholesale Corp fell 2.44% after Wells Forgo Securities downgraded the retailer, citing a high valuation.