Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 01/14” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
Taking a breather from its longest winning streak since September 2018, the S&P 500 index closed today’s session mostly flat as investors keenly await the start of the earnings season next week looking for fresh clues of the health of the economy. Driven by optimism surrounding a favorable U.S. – China trade deal and easing for rate hike fears following a cautious stance by the Federal Reserve, the index logged a third straight weekly gain of 2.54%, leading it out of a correction territory it had fallen into this Christmas Eve.
Opening on a weaker note following a weaker-than-expected CPI data for the month of December, the index attempted to erase losses but was weighed down by weakness in Energy and Utility sectors. Confidence also remained capped as the partial government shutdown now enters into its 21st day, longest ever on record with no end in sight.
Swinging between a narrow range on the back of a mixed sectorial performance, the index closed relatively flat at 2596.26, down only 0.38 point over previous session’s close (just a few points shy of breaking out of a psychologically important resistance level of 2600).
THE DETAILS (The “How & Why”):
Leading the day’s declines were Energy stocks, down 0.63% alongside a sharp decline in oil prices. Ending its longest winning streak of nine straight sessions, oil prices fell nearly 2% amid concerns of a slowing global economic growth. ConocoPhillips and EOG Resources Inc. were the worst decliners within the sector, down 2.28% and 2.27%, respectively.
Utilities sector shed 0.44%, broadly lower led by a 2.85% decline in Dominion Energy Inc. Separately; the dollar rebounded from its recent weakness to weigh down on commodity prices. Materials and Industrials sectors traded lower for the day, closing the session lower by 0.40% and 0.12%.
Technology and Communication Services were the other decliners of the session, both closing the session lower by 0.14% each. Activision Blizzard Inc. was the worst performer of the session, tumbling 9.37% after the video game company announced its split with its video game developer Bungie and transferring the full publishing rights and responsibilities of its popular game ‘Destiny’ to Bungie.
Offsetting this sharp decline were strength in semiconductor stocks. Qorvo Inc., NVIDIA Corp and Skyworks Solutions Inc. all gained 2.96%, 2.48% and 2.08% intraday, respectively following reports that Apple Inc. now plans to launch three new iPhones including a higher-end model and a successor to the budget-friendly iPhone XR.
On the other hand, supporting the day’s gains were defensive sectors. Health Care, Consumer Staples and Real Estate all higher by 0.33%, 0.30% and 0.24% alongside a slide in the 10-year Treasury yield that settled at 2.704% following a tepid CPI data for the month of December. The broader Financials sector, however, held on to slight gains, ending the session slightly higher by 0.12% ahead of earnings release by major banks like JP Morgan Chase & Co, Goldman Sachs and American Express, looking for fresh clues of slowing earnings growth going forward.
All of the eleven primary sectors were higher for the week with Industrials and Real Estate giving the best weekly returns of 4.09% and 3.97% on the back of easing of rate hike fears. While
the market will turn its focus on the fourth-quarter earnings season starting next week, key economic reports like PPI (Producer Price Index) and Industrial Production will also be a key focus of investors looking for fresh cues about the health of the economy.