Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Friday, 08/10” will be posted by 7:30am/8:00am EDT, Friday.
THE GIST (“THE WHAT”)
With the second quarterly earnings season nearing an end, the S&P 500 index struggled to re-test the very strong resistance now found at its all-time high. Trading in a very tight range on below-average volume for the third day in a row, the index struggled to hold on to gains as Energy stocks extended their slid and Financials stocks fell alongside a fall in yields following a weaker-than-expected inflation data.
Oscillating between small gains and losses after registering the day’s high at 2862.48, the index pulled back sharply in the final minutes of the session. With mixed earnings across the sectors failing to provide a meaningful support for catapulting the index to record highs, the index closed near session lows at 2853.58 (just within 1.5 points away from the level indicated by our models for a bullish bias. Click here for the full report), down 4.12 points and losing a slight 0.14% over previous session’s close. Six out of the eleven primary sectors ended the session lower.
THE DETAILS (The “How & Why”):
Oil prices fell for the second consecutive day to reach a seven-week low as investors weighed falling Iranian oil supplies against the falling Chinese oil demand. The broader Energy sector closed the session 0.89% lower led by a 7.23% fall in Murphy Oil Corp. Several offshore drilling companies tumbled after Barclay’s downgraded Noble Energy Inc. citing overvaluation.
Treasury bond yields edged lower after the Producer-Price Index for the month of July remained unchanged, indicating a tamed inflation. The 10-year Treasury yield settled 3 basis points lower at 2.93%, weighing down on the broader Financials sector that closed the session lower by 0.56%.
Industrials, Consumer Staples and Health Care sectors were the other notable decliners in the index, down 0.57%, 0.34% and 0.10% respectively. Perrigo Co and Coty Inc. were among the worst performers of the day, losing 10.56% and 7.25%. Seagate Technology PLC fell sharply by 7.30% after Goldman Sachs downgraded the company, dragging the broader Technology sector lower by a slight 0.05%.
On the other hand, Telecommunications sector outperformed by 0.98%, limiting the day’s losses. Materials, Utilities and Consumer Discretionary sectors also closed the session higher by 0.50%, 0.41% and 0.38% respectively. CenturyLink Inc. and Viacom Inc. were among the top gainers in the index, soaring 13.11% and 6.01% on beating second quarter earnings estimates.