Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 05/28” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
Easing of trade tensions helped the S&P 500 index to take a breather from previous two session’s panic selling that dragged the index to log a third straight weekly decline. Heading into the long-weekend as markets will be closed Monday in observance of Memorial Day, the index closed higher albeit off of session highs.
In an attempt to calm nervous investors, President Trump said late Thursday that he could consider easing restrictions on Huawei Technologies Inc. as part of a wider trade deal with China. The index gapped higher at the open but struggled to maintain gains on a relatively thin volume amid disappointing earnings and lingering trade tensions. Treasury yields rose alongside a jump in risk appetite, benefiting bank stocks. Led by Financials, the index capped the week’s sharp plunge by closing slightly higher at 2,826.06, up only 3.82 points.
THE DETAILS (The “How & Why”):
Demand for Government bonds faded alongside an increase in risk appetite as trade jitters eased. The 10-year Treasury yield bounced back after hitting its lowest level since October 2017 on Thursday, settling higher at 2.327%. Wells Fargo & Co, SVB Financial Group, Charles Schwab Corp, Capital Financial Corp and Bank of America Corp., all gained more than 1% higher each. Closing 0.77% higher, the broader Financials sector led the day’s advances.
Semiconductor stocks extended their decline in the wake of the U.S. crackdown on Huawei Technologies Inc. that threatens to disrupt the industry’s supply-chain. Qualcomm Inc. was the biggest percentage decliner within the chip stocks, down 3% on the back of ongoing anti-trust litigations. NVIDIA Corp., Microchip Technology and Lam Research Corp. all shed more than 1% apiece.
Losses within the broader Technology sector was however offset by a solid 13.88% jump in Total System Services Inc. on reports that payment technology company Global Payments is planning to acquire the company for about $20 billion. Intuit Inc. also rose 6.70% after the accounting software company delivered better-than-expected first-quarterly results.
Energy stocks snapped a 2-day decline, gaining ground alongside a rebound in oil prices which edged higher on the back of easing trade tensions. Commodities and metals also settled higher, lifting Material stocks by 0.50%.
Retail earnings continued to disappoint investors. Foot Locker Inc. was the worst performer of the session, plunging 15.96% after the footwear retailer missed sales and earnings estimates. Autodesk Inc. was another major decliner, falling 4.91% following a weaker-than-expected quarterly performance and a disappointing guidance.
Consumer Staples and Utilities were the only sectors not participating in today’s relief rally, closing lower by 0.40% and 0.21%. Investors rotated out of dividend paying yield-sensitive stocks and buying back the beaten down growth stocks looking for bargain trades amid rising risk-appetite in today’s relief rally.