Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Monday, 08/06” will be posted by 7:30am/8:00am EDT, Monday.
THE GIST (“THE WHAT”)
Upbeat earnings took center stage once again, as investors largely ignored escalating trade tensions in the background. The S&P 500 index opened higher as investors found refuge in modest jobs data indicating an expanding economy, but not to the extent of overheating to push the Federal Reserve to get aggressive.
While the index remained choppy during the early session as investors weighed trade tensions against the ongoing strength in the labor market, it gained momentum during the afternoon session on the back of solid results reported by companies across sectors. With 10 out of the 11 primary sectors ending the session higher, the index closed near session highs at 2840.35 (Less than half a point above the level suggested by our models to shift our current indeterminate bias to bullish. Click here to the full text), up 13.13 points, gaining a modest 0.46% over previous day’s close.
Rebounding from a major sell-off in Technology stocks along with a renewed trade spat between the U.S. and China, the index closed another busy week of earnings season with a fifth straight weekly gain, the longest streak of weekly gains since December as strong corporate performances continue to dominate the price actions.
THE DETAILS (The “How & Why”):
The monthly Non-Farm Payroll data indicated that 157,000 jobs were added in the month of July compared to the expected 195,000. The data came in below expectations, indicating an expanding economy but not at the rate of overheating, thus avoiding aggressive monetary policies by the Federal Reserve.
Weighing down on the index during the early morning session was the latest update on trade war front. China responded with threats of retaliatory tariffs of its own on the U.S. goods valuing up to $60 billion, with the rates ranging anywhere between 5% to 25%. Investor reaction however was relatively muted as trade talks now seem to be mostly priced in.
Leading the day’s gains were dividend paying defensive sectors, including Real Estate, Consumer Staples, Utilities and Health Care, all up 1.28%, 1.17%, 1.03% and 0.64% respectively. Kraft Heinz Co. was among the top gainers in the index, rising 8.55% on beating earnings estimates. The food company also announced that it is considering a potential acquisition of Campbell Soup Company, boosting the broader Consumer Staples sector. Cerner Corp. lifted the Health Care sector by gaining 6.16% on surpassing revenue estimates.
Technology stocks took a breather after leading the index in the last two sessions. While the broader sector gained a modest 0.34%, gains were capped due to a 7.81% and 5.78% fall in Symantec Corp. and Western Union Co. respectively following disappointing earnings release.
Materials, Consumer Discretionary and Telecommunication sectors were also higher for the day, up 0.86%, 0.33% and 0.93% respectively. The 10-year Treasury yield fell 4 basis points following a neutral jobs data, settling at 2.947%. Financial stock however ended the session higher by 0.53% in today’s broad-based rally. DISH Network Corp. was the best performer in the index, soaring 14.53% on the back of better-than-expected second quarterly results.
On the flip side, Energy
sector was the only decliner in today’s session, down for the second day by 0.47%, weighed down by disappointing quarterly results by Notable Energy Inc. and Concho Resources Inc. Losing 7.92% and 5.99% respectively, these energy companies were amongst the worst performers of the day. Oil prices fell on the back of rising global crude oil production, further dragging the sector lower in today’s session.
sector was the only decliner in today’s session, down for the second day by 0.47%, weighed down by disappointing quarterly results by Notable Energy Inc. and Concho Resources Inc. Losing 7.92% and 5.99% respectively, these energy companies were amongst the worst performers of the day. Oil prices fell on the back of rising global crude oil production, further dragging the sector lower in today’s session.
With a solid weekly gain of 3.31%, Real Estate sector was the top gainer of the week, followed by Telecommunications and Health Care, up 2.22% and 2.10% respectively on a weekly basis. On the other hand, Energy sector was the worst performer this week, down 1.79% as oil prices remain volatile due to conflicting supply signals.