Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 03/04” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
Logging a fifth consecutive weekly gain the S&P 500 index closed Friday’s session higher for the first time in four days. Opening higher on renewed trade optimism, the index was pulled back on registering the session high at 2808.02 following disappointing economic data.
Bouncing off the day’s low of 2787.38, the index, however gained an upward momentum as investors focused on strong corporate earnings, pushing it above the closely watched major technical resistance level of 2800 after several failed attempt this week to pierce through this level. With Energy and Health Care sectors leading the gains, the index closed at 2803.69, up 19.20 points and gaining a modest 0.69% over the previous day’s close.
THE DETAILS (The “How & Why”):
Reports that the Trump administration is getting a final trade deal ready to be signed by the U.S. and China around mid-March helped lift sentiment at the session open. A series of disappointing economic data however, overshadowed the renewed trade optimism.
The ISM’s manufacturing index for the month of February fell to its lowest since November 2016, suggesting that the economic activity expansion has slowed down. Consumer spending during the month of December fell the most since 2009, confirmed by the recent disappointing retail sales data. Meanwhile, the University of Michigan’s Consumer Sentiment index for February also came in below expectations.
Investors brushed aside the concerns of slowing economy, turning their focus on better-than-expected earnings in the afternoon session. Energy sector gained some of its lost ground to lead the index higher in Friday’s gains, rising broadly by 1.81% despite oil prices tumbling on concerns of rising domestic supply and falling demand.
Health Care sector also outperformed the broader index with a solid 1.41% gain. Dentsply Sirona Inc. soared 17.65% to be the top gainer of the session after the maker of dental products and technologies posted impressive fourth-quarterly performance and a strong fiscal year guidance. Celgene Corp and Bristol- Myers Squibb Co. rose more than 3% each, rebounding from their previous session’s slump after Bristol-Myers Squibb Co.’s largest shareholders had opposed a $74 billion buy-out deal to buy Celgene Corp.
Retail stocks extended their recent gains led by a solid 16.18% jump in Gap Inc. after it announced its plan to spin-off its Old Navy brand into a separate company in an attempt to unlock the hidden value of this brand that has been growing at a much faster rate than its other chains, including Banana Republic, Athleta, Intermix, and Hill City. Foot Locker Inc. also fueled sector gains by climbing 5.96% on strong earnings.
Consumer Discretionary, Technology and Communication Services sector were the other notable gainers, closing the session higher by 0.92%, 0.71% and 0.78%, respectively. Financial stocks benefited from rising yields as the 10-year Treasury yield settled 4 basis points higher at 2.755%.
Capping these gains were Consumer Staples, Materials and Real Estate sectors, trading slightly lower alongside rising Treasury yields and a strengthening dollar. While Walgreens Boots Alliance Inc. tumbled 6.43% on disappointing earnings, Amazon.com Inc. sparked a sell-off in supermarket and grocery stores stocks after the e-commerce giant announced its plan to open dozens of grocery stores across U.S. cities. Kroger Co. and Walmart Inc. fell 4.47% and 1.07%, respectively on this news.