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”)
Cautious optimism around trade, positive economic data and ECB’s quantitative easing fueled the week-long bond market sell-off, sending yields to their 6-week highs and pushing the S&P 500 index closer to all-time high of July 26, 2019. Rotation out of growth stocks and into the value stocks resumed alongside easing recession jitters following better-than-expected economic data.
The S&P 500 index whipsawed within a relatively narrow range and flirted with the flat line for most part of the session as weakness in Real Estate offset strong gains in Materials and Financials stocks. Apple Inc. and Broadcom Inc. weighed down on Technology stocks. Posting a third straight weekly gain, the index closed the choppy session mostly unchanged at 3007.39 and less than 1% shy of hitting the record highs.
THE DETAILS (The “How & Why”):
On trade front, China suspended tariffs on several U.S. agricultural products that had been heavily taxed, including soybeans and pork for a year. The announcement was made after President Trump hinted at his willingness to postpone the additional Chinese tariffs and sign an interim trade deal.
Beneath the muted price action in the broader S&P 500 index, Materials was the biggest percentage gainer, up 1.14%. Copper price hit its one-month high amid easing trade tensions. Freeport McMoRan was the strongest performer within this space, jumping 3.76% alongside surging copper prices. Boeing Co and Caterpillar Inc. climbed 1.10% and 1.54%, respectively to boost the broader Industrials sector by 0.52%.
Financial stocks remained in favor with rising Treasury yields, closing 0.82% higher. Bank of America Corp, Citigroup Inc., Comerica Inc. and JPMorgan Chase & Co gained more than 1% apiece. Investors continued dumping safe-haven bonds after the retail sales data for the month of August came in better-than-expected, easing recession jitters. The 10-year Treasury yield spiked 12 basis points to settle at 1.90%.
Building on previous three sessions’ weakness, oil prices settled lower after the OPEC meeting ended without any decision around production cuts. Energy stocks, however, traded higher for the day amid improving sentiment about the economic expansion following positive economic data this week. Cimarex Energy Co. was the top gainer of the session, soaring 8.21%. Pioneer Natural Resources Co., Halliburton Co and Devon Energy Corp were the other strong performers within this space, jumping more than 2% apiece.
On the flip side, defensive and growth stocks were sold-off across the board as yields extended their rebound. Real Estate sector was the biggest drag on the index, closing 1.27% lower. Consumer Staples and Utilities also posted modest losses.
Meanwhile, Apple Inc. dragged the Technology space lower, falling 1.94% and back below the $1 trillion valuation after Goldman Sachs lowered its price target citing that the accounting treatment used to account for its recently launched free trials of Apple TV+ could negatively impact the tech-giant’s bottom line. Broadcom Inc. further accelerated losses in this space, shedding 3.41% on missing earnings estimates.