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”)
Building on previous session’s optimism over a potential Fed rate cut, the S&P 500 index charted a new record close. Hovering above the 3000 level for most part of the session, the index rallied in the late-afternoon session to close near session highs at 3013.77 for the first time, up 13.86 points and gaining a decent 0.46% over previous session’s close.
Trading volume, however, remained thin as investors brace for the start of second-quarter earnings season next week. Eight out of the eleven primary sectors posted solid gains, with Industrials, Materials and Consumer Discretionary leading the advances. Defensive sectors continued to lag as investors favored safe-haven bonds as Treasury yields inched higher.
THE DETAILS (The “How & Why”):
Weakening dollar helped boost trade-sensitive sectors in today’s rally. Industrials, Materials and Consumer Discretionary were the strongest performers of the session, all closing higher by more than 1% each. Transportation and airline stocks traded broadly higher led by a 5.90% jump in J.B. Hunt Transport Services Inc. ahead of its earnings release on increasing bets that an easing monetary policy will benefit the economy, thus boosting earnings of transportation stocks.
Retail and auto stocks were all higher for the day. Under Armour Inc., Ulta beauty Inc., Macy’s Inc., Mattel Inc. and Lowe’s Company Inc. all gained more than 2% apiece, while L brands Inc. led the space with a 4.04% gain. Chip stocks powered the Technology space higher. Broadcom Inc., Lam Research Corp and Intel Corp rose 3.38%, 3.43% and 2.72%, respectively.
On the flip side, defensive sectors capped these gains as investors continued selling them in favor of safe-haven bond assets. The 10-year Treasury yield edged lower to settle at 2.106%, albeit registering a biggest weekly rise in three months following an unexpected jump in CPI and PPI readings for the month of June.
Health Care was the weakest performing sector, down sharply by 1.18% weighed down heavily by a 16.12% plunge in Illumina Inc. after the genomic sequencing giant guided lower for the second quarter. Johnson & Johnson was another major decliner within this space, tumbling 4.15% following reports that the Department of Justice will be pursuing a criminal investigation against the company to find out if the health care conglomerate lied about possible cancer risks from its baby talcum powder products.
Utilities and Real Estate sectors were the other laggards of the session, down 0.64% and 0.39%, respectively. Investors brace for second-quarter earnings season starting next week. Earnings estimates are broadly lowered in the wake of gloomy economic outlook and increasing negative impact of trade tensions. Netflix Inc., JP Morgan Chase & Co., Citigroup Inc., Goldman Sachs Group and Bank of America Corp. are all scheduled to report next week.