Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 04/08” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
Signs of progress in trade negotiations, coupled with a bullish jobs report lifted the S&P 500 index for the seventh straight session. Extending gains for the week and logging its longest winning streak of seven days since October, 2017, the index inched closer to its record all-time highs.
Maintaining early session gains, the index whipsawed within a tight range and closed near session highs at 2892.74, up 13.35 points and gaining 0.46% gain over previous session’s close. Ten out of the eleven primary sectors traded higher for the day, with Energy sector leading the advances alongside surging oil prices.
THE DETAILS (The “How & Why”):
Fears of recession were eased after a strong jobs report indicated that the U.S. economy added 196,000 jobs in March as against the expected figure of 175,000. While the unemployment rate continued to remain at a 49-year low of 3.8%, wage growth rose at a below-than-expected rate of 3.4%, easing concerns of rising inflation and reinforcing the Federal Reserve’s decision of keeping the benchmark interest rate on hold.
Treasury yields rose after an upbeat jobs report that followed after disappointing economic data earlier in the week. The 10-year Treasury yield hit the day’s high at 2.54% but pulled back later in the session to close at 2.495%, down 2 basis points. Banking and Financial stocks gave back their early session gains to close relatively unchanged.
A bullish employment data lifted oil prices, which were further fueled on signs of tightening supply to hit their five-month high. Apache Corp., EOG Resources Inc. and Anadarko Petroleum Corp. were the top gainers of the session, jumping 6.59%, 5.30% and 4.33%, respectively. The broader Energy sector was the best performing sector of today’s session, logging a solid 1.69% gain.
Utilities, Health Care and Consumer Discretionary were the other strong performers, up 1.00%, 0.70% and 0.63%, respectively. Technology, Industrials and Consumer Staples also sported modest gains of 0.30% and 0.27%. Semiconductor stocks extended their gains with Lam Research Corp., Microchip Technology, NVIDIA Corp and Skyworks Solutions Inc. all rising more that 1% each.
After leading the broader index for two sessions in a row, Materials sector closed mostly unchanged, down 0.05%. Freeport-McMoRan Inc. was the biggest drag on the sector. The mining giant gave back some of its previous session’s strong gains, closing 1.84% lower on the back of profit taking. Meanwhile, Boeing Inc. capped gains within the Industrials space, falling 0.99% after UBS cut its price target amid ongoing investigations into the safety of its 737 Max planes.
The index closed the week with a 2.06% return, primarily driven by hopes that a potential end to the prolonged trade dispute between the U.S. and China could end tariffs and boost corporate profitability. Investors now brace for the first quarterly earnings season, expecting an approximate 2% decline in earnings for the S&P 500 companies.
Among the major companies reporting their earnings next week are Levi Strauss & Co., Delta Air Lines Inc., Bed Bath & Beyond Inc., J.P. Morgan Chase and Wells Fargo & Co. Along with the CPI Inflation data, investors will be looking forward for the minutes of Federal Reserve’s February meeting due Wednesday. New developments around U.K.’s Brexit will also remain a key focus for the markets.