Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
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THE GIST (“THE WHAT”)
Expectations that additional stimulus announced by China and Europe to ramp up their economies could avert recession helped ease anxieties of global economic meltdown. Treasuries halted their week-long slide, lifting risk-appetite and trimming some of the week’s sharp losses. The S&P500 index, however, registered a third straight weekly loss as bond market continues flashing signs of an impending recession.
The index closed the turbulent week on a positive note at 2888.68, up 41.08 points and gaining 1.44% over previous session’s close. All of the eleven primary sectors posted strong gains. Technology, Financials and Industrials were among the best performers in today’s relief rally.
THE DETAILS (The “How & Why”):
China announced an additional stimulus package of $19 billion in an attempt to avert recession in the wake of crippling protest in Hong Kong. The ECB also signaled at a substantial stimulus measure next month. Demand for safe-haven bonds eased, lifting Treasury yields higher and steepening the spread between the 2-year and 10-year yield by 3 basis points. The 30-year Treasury yield also bounced back from historic lows and hovered around the closely-watched 2% mark.
The S&P 500 index surged alongside rising risk-appetite. Industrials, Technology and Financials were the strongest performers of today’s relief rally. General Electric Co. bounced back from a brutal see-off on fraud allegations; soaring 9.74% after its CEO Larry Culp revealed that he has purchased $2 million worth of shares of the struggling conglomerate.
Deere & Co. fueled gains within the Industrials space by jumping 3.84%. Investors shrugged off the heavy equipment maker’s disappointing earnings while rewarding the management’s attempt to reduce future expenses and boost bottom line. Transportation and airline stocks also traded higher for the day, erasing some of their recent sharp losses.
NVIDIA Corp. surged 7.25% on beating earnings estimates, leading the Technology sector higher and boosting other semiconductor stocks. Advanced Micro Devices Inc. rose 5.09%, while Micron Technology Inc., DTX Technology Co and Lam Research Corp jumped more than 3% apiece. Alliance Data Systems Corp. capped gains within this space, plunging 9.06% following stock downgrade by Deutsche Bank.
Easing of recession jitters also sparked a rebound in oil prices following a two-day slide. Energy, Materials, Health Care, Consumer Staples and Consumer Discretionary all posted gains of more than 1% each. Dividend-paying Utilities and Real Estate sectors, however, lagged in gains as yields bounced back from their historic lows.