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 last published Results of the Morning Trading Plans, please click here.
THE GIST (“THE WHAT”)
The S&P 500 index struggled for direction on the last day of the week and of the most volatile month of the year that kept the index confined within the 2940-2825 level. As investors juggle between conflicting messages around U.S. – China trade disputes, coupled with the recessionary signals flashed by bonds market, the roller-coaster month of August ended relatively unchanged, down slightly by 0.19%, registering it as the second worst month of the year after May.
Opening the session higher, the index pulled back sharply amid looming tariff threats and trade policy uncertainties. Brutal sell-off of Ulta Beauty Inc. following dismal results weighed down heavily on retail space, dragging the Consumer Discretionary space to be the biggest laggard of the session. Oscillating between slight gains and losses for most part of the latter session, the index closed mostly unchanged at 2926.46, down only 1.88 points over previous session’s close. Trading volume remained thin ahead of long holiday weekend.
THE DETAILS (The “How & Why”):
Consumer Discretionary sector led the broader index lower with a 0.56% decline. Ulta Beauty Inc. was brutally sold-off by 29.55% after the beauty retailer posted disappointing same-stores sales growth and issued a dismal outlook citing a slowdown in new product development in beauty space. Consumer Staples and Communication Services were the only other sectors sporting slight losses.
Meanwhile, Treasury yields extended their decline across the yield curve. The 10-year Treasury yield attempted to stabilize, but settled mostly unchanged at 1.50%. The closely-watched curve between the 2-year and 10-year yields remains inverted amid growing signs of global economic weakening.
Extending their previous session’s gains, Materials, Industrials and Financials posted modest gains of 0.67%, 0.44% and 0.40%, respectively in today’s lackluster session. Among strong individual movers, Western Digital Corp., Dollar Tree Inc. and Campbell Soup Co. were the top gainers of the session, all jumping close to 4% apiece. On the flip side, Alexion Pharmaceuticals Inc. tumbled 10.17% after Amgen Inc. challenged the patents rights of its top-selling blood disorder treatment drug Soliris.
Investors will enter into the ‘sell September’ month closely monitoring developments around U.S. – China trade talks and expecting the Fed to provide a much needed cushion against the damage that could be done by the prolonged trade war. Despite China expressing willingness to resolve trade disputes with ‘calm attitude’, additional tariffs on $300 billion worth of Chinese imports with an increased rate of 15% are expected to go into effect on Sunday, September 1.