Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
For the Outlook, Forecast, and Trading Plans published this morning, please click here
For the Results of the morning’s Trading Plans, please click here.
THE GIST (“THE WHAT”)
The S&P 500 extended its choppy trading within a tight range for the second straight session, edging higher amid optimism that the key meeting between President Trump and Chinese President Xi Jinping at the G20 Summit over the weekend will give some evidence of progression toward resolving the prolonged trade disputes. Trading volume, however, was relatively thin going into the crucial weekend.
Bank stocks outperformed to lead today’s broad-based rally on passing the second round of Fed’s annual stress test. Rallying into the close, the index closed near session highs at 2941.76, up 16.84 points and gaining 0.58% over previous session close. Primarily led by a shift in the Fed’s monetary policy stance towards easing in the wake of slowing economic growth and uncertainties around trade policies, the index logged its best first-half in nearly two decades.
THE DETAILS (The “How & Why”):
The broader Financials sector received a solid boost from gains across major banks on passing the Federal Reserve’s annual stress test, which gave the banks an approval to increase dividends and share repurchase programs. JPMorgan Chase & Co, Goldman Sachs Group Inc., Wells Fargo & Co and Bank of America Corp all raised their quarterly dividends and buy-back plans, boosting their stocks by more than 2% each.
Treasury yields, however, registered a decline for the third quarter in a row amid concerns over slowing global economic growth. The 10-year Treasury yield inched slightly lower, but managed to settle at the closely-watched 2% level.
Energy stocks were strong performers in today’s broad-based rally, led a sharp 9.56% jump in EQT Corp. Oil prices, however, fell ahead of the U.S. – China trade talks over the weekend and key meeting between OPEC member early next week.
Oil prices took a sharp leg lower just before session close on reports that the European parties to the Iranian nuclear deal will attempt to normalize trade with Iran. National Oilwell Varco Inc., Noble Energy Inc., Marathon Petroleum Corp, HollyFrontier Corp. all soared more than 2% apiece, lifting the Energy sector by 1.19%.
Trade-sensitive Industrials, Materials and Communication Services were the other notable gainers, all gaining on cautious optimism ahead of trade talks. Defensive sectors lagged in gains, under-performing the broader index. Biogen Inc. dragged the Health Care space lower, falling 2.46% following bearish comments by an analyst that its drug for multiple sclerosis is losing market share to new competitors.