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 index held on to small gains during the early session, chopping within a narrow range as investors weighed a mixed batch of earnings against the lowered expectations of a 50 basis point rate cut. Gains faded in the afternoon session as the index tumbled on reports of intensifying tensions in the Persian Gulf after Iran’s Revolutionary Guard Corps seized a British oil tanker in the Strait of Hormuz.
With eight out of the eleven primary sectors sharply lower, the index closed the choppy session at 2976.61, down 18.50 points and losing 0.62% over previous session’s close. Defensive sectors led the decliners alongside a jump in Treasury yields, while Industrials and Energy stocks limited losses on the back of climbing transportation stocks and oil prices.
THE DETAILS (The “How & Why”):
Early session gains were supported by a strong rally in Microsoft Corp. The software giant hit record highs and cemented its spot of being the world’s most valuable company on topping earnings estimates and reporting a solid 39% year-on-year jump in cloud revenue. Boeing Inc. further fueled the early gains, climbing 4.50% after announcing a $4.9 billion charge in its second quarter to compensate for 737 Max planes’ global grounding.
Expectations of a 50 basis point rate cut this month end was lowered after St. Louis Fed President James Bullard downplayed the aggressive dovish comments by the New York Fed President John Williams and favoring a 25 basis point rate cut. Defensive sectors were sold off across the board as Treasury yields rose on lowered expectations of an aggressive rate cut. Real Estate, Utilities and Health Care were the biggest laggards of the session, down 1.69%, 1.45% and 1.06%, respectively.
Communication Services and Technology were the other notable decliners, down 1.32% and 0.55%. Alliance Data Systems Corp. was the worst performer of the session, falling 4.08% on missing earnings expectations. Meanwhile, FAANG components was led lower by Netflix Inc. The video streaming giant extended its losses, shedding another 3.11% on missing international subscriber growth by a large number.
Bank earnings rolled in with State Street Corp and Citizens Financial Group Inc. jumping more than 6% apiece on beating estimates. American Express Co, however, gave back 2.79% on issuing disappointing outlook amid rising expenses as the credit card issuer spends heavily on reward programs to attract and retain customers.
Meanwhile, oil prices surged on reports of intensifying tensions in the Persian Gulf following reports that Iran’s Revolutionary Guard had seized a British oil tanker in the Strait of Hormuz in retaliation of the Iranian tanker seizure in Gibraltar. Energy stocks climbed higher alongside soaring oil prices. Occidental Petroleum Corp., Marathon Oil Corp, Devon Energy Corp and Concho Resources Inc. all jumped by more 2% apiece.
Industrials also posted modest gains, closing higher by 0.46%, led by Kansas City Southern and J.B. Hunt Transport Services Inc. These trucking companies climbed more than 4% each and boosted other transportation stocks following better-than-feared earnings.