Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 04/15” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
Robust results posted by JP Morgan Chase & Co set a positive tone for the corporate earnings season, lifting the S&P 500 index above the consolidation range it was confined to and closing at a striking distance away from all-time highs registered in September 2018.
Gapping higher at the open, the index trimmed gains alongside plunging Health Care stocks amid growing political risks within the industry. A solid jump in Anadarko Petroleum Corp and Walt Disney Co, however, improved sentiment to lift the index to close near session highs at 2907.41, up 19.09 points and registering a third straight weekly gain of 0.51%. Except Health Care, all other ten primary sectors traded higher. Trading volume also improved alongside a slide in Walls Street’s ‘fear index’, the CBOE VIX which hit its lowest level in six months.
THE DETAILS (The “How & Why”):
Financials sector led the day’s advances, closing solidly higher by 1.93%. JP Morgan & Chase kicked off bank earnings and set a positive tone to the corporate earnings season. The big bank jumped 4.69% on posting its best earnings results since second quarter of 2012. Treasury yields edged up to hit their highest level in 3 weeks, boosting gains in banks and financial stocks.
While PNC Financial Services Group Inc. rose 3.09% on meeting earnings expectations, Wells Fargo & Co fell 2.62% after its CFO issued a tepid outlook for net interest income. Morgan Stanley, Bank of America Corp. and Citigroup were all solidly higher by 4.22%, 3.78% and 2.29%, respectively ahead of their earnings releases next week.
The early session got a lift from upbeat economic data out of China that showed that exports for the month of March rose better-than-expected by 14.2%. A rebound from a sharp drop in the previous month suggested improving demand and growth prospects, easing global growth concerns. Copper and oil price surged on signs of stabilization in China, further fueled by a weakening dollar to lift the broader Materials sector by 1.31%.
Industrials and Communication Services were also sharply higher by 1.28% and 1.23%, respectively. Boeing Inc. extended its gains by 2.56% on reports of software upgrade for its troubled 737 Max jets. Walt Disney Co. soared 11.54% to hit record highs on unveiling its new streaming service, Disney Plus, sending its rival video-streaming giant Netflix Inc. tumbling by 4.49%.
Shale oil stocks got a major lift on signs of consolidation within the industry after oil giant Chevron Corp. announced its plan to acquire Anadarko Petroleum Corp. for a hefty 38.9% premium, making Chevron one of the largest acreage holders and producers in the Permian Basin. While Anadarko surged 32.01% to be the top gainer of the session, Chevron declined 4.94%. Concho Resources Inc., Devon Energy Corp and Noble Energy Inc. all jumped 8.75%, 7.38% and 6.92%, respectively.
Health Care stocks were the biggest drag on the index for the second session in row, down 0.97% amid growing political risks within the industry. In an attempt to curb the rising costs of prescription drugs, lawmakers threatened to take legislative actions to improve transparency in pricing procedures. Anthem Corp., UnitedHealth Group Inc. and Centene Corp. were among the worst decliners of the session, falling 8.48%, 5.18% and 4.01%, respectively.