Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 09/05” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
The S&P 500 index opened the month of September on a weaker note as investors keep a close watch on the latest developments on trade negotiations between the U.S. and Canada. The countries will resume their trade discussions tomorrow, with an apparent aim to bridge their differences and renegotiate the NAFTA agreement. Currency crisis in the emerging markets further weighed down on investor confidence.
The index whipsawed between the 2885.13 – 2900.18 trading range, but stayed above the level indicated by our medium term models for continuation of the current bullish bias. (Click here to read the full text). Led by Telecommunications and Materials sectors, the index closed a choppy trading session at 2896.97, down 4.80 points and losing 0.17% over previous day’s close.
THE DETAILS (The “How & Why”):
Telecommunications was the weakest performing sector in the session, led by a 2.17% decline in Verizon Communications Inc. The telecom service provider fell on stock downgrade by Barclays citing that the company’s near term growth has already been priced in.
Trade sensitive Materials stocks extended their slide as metal prices were moderately lower due to the strengthening dollar. Sell-off in Emerging Market currencies lifted the dollar value as South Africa entered into recession and Turkish Lira and Argentine Peso tumbled to record lows. Freeport-McMoRan Inc. and Newmont Mining Corp were the worst performers within the sector, losing 4.06% and 3.03%.
Advanced Micro Devices Inc. soared 11.48% to be the top gainer of the day, after the chipmaker received a ‘buy’ rating from analysts at Jefferies, citing its technological advantage over Intel Corp. The broader Technology sector, however, closed the session lower by 0.30%, led by a 7.71% decline in Seagate Technology PLC following a stock downgrade by Evercore ISI. Among the other notable decliners were Real Estate, Health Care and Energy sectors, down 0.90%, 0.73% and 0.22% respectively.
The manufacturing index issued by the Institute for Supply Management reaffirmed the current strength in the economic growth, climbing to a 14-year high. Treasury yields edged up on expectations of another rate hike this month by the Federal Reserve. Financials stocks rose 0.53% alongside a rise in Treasury yields. Several retailers and department stores extended their previous session gains, lifting the broader Consumer Discretionary sector by 0.25%.
While dividend-paying Utilities stocks typically fall with rising interest rates, the sector closed the session higher by 0.55% led by PG&E Corp. and Edison International. These two biggest utility companies in California gained 1.80% and 1.55% respectively after the lawmakers passed a legislation to assist the companies to pay off their significantly high liabilities from wildfire costs incurred last year.