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 last published Results of the Morning Trading Plans, please click here.
THE GIST (“THE WHAT”)
Mixed batch of employment data that eased some of the recession fears while not dampening the expectations of a third Fed rate cut, helped the S&P 500 index to trim most of the week’s massive losses. Extending the relief rally into the second session, the index regained key support levels of 50 DMA (now at 2942.37) and 100 DMA (now at 2927.18).
All of the eleven primary sectors rallied strongly on hopes of a Fed bailout. Technology and Financials led the day’s sharp gains. Grinding higher on a steady momentum throughout the session, the index closed near session highs at 2952.01, up 41.38 points and gaining 1.42% over previous session’s close. The index, however, registered a third straight weekly decline in the face of heightening political and trade uncertainty.
THE DETAILS (The “How & Why”):
Despite the contracting manufacturing and service activities, the unemployment rate fell to a 50-year low at 3.5%. According to the Bureau of Labor Statistics, U.S. economy added 135,000 jobs in September, well-below expectations of 145,000. Showing resilience in the face of softening economic data, the index staged a solid rebound from early week’s steep losses amid increasing odds of a third Fed rate cut at the end of October.
With the highly-awaited U.S. – China trade talks resuming next week, expectations that the disputing countries will show urgency in resolving their differences also improved sentiment. The long protracted trade war has started bleeding into the economy, as evident by the softening of manufacturing and service data. The 10-year Treasury yield tumbled further following weaker-than-expected jobs data, but settled off of session lows at 1.53%.
Financials and Technology posted the biggest percentage gains of 1.93% and 1.71%, respectively. Skyworks Solutions Inc. was the top gainer of the session, up 4.37%. Apple Inc. led the FAANG components higher, jumping 2.80% following reports that the tech-giant will be increasing the production of its recently launched iPhone 11 by almost 10%.
Defensive sectors also outperformed in today’s broad-based rally. Utilities, Consumer Staples and Health Care all closed higher by more than 1%. Energy stocks, however, lagged the broader index with a modest 0.62% gain. Oil prices snapping its eight day losing streak, but logged its worst weekly decline since mid-July amid concerns of weakening global energy demand.