Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 10/01” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
Mirroring the European market sell-off, the S&P 500 index opened lower, but soon gained an upward momentum following a bag of mixed economic data and a rally in chip stocks. The index, however, pulled back on registering the day’s high at 2920.53, whipsawing between small gains and losses and closing the session flat at 2913.98, fractionally lower by only 0.02 point and down 0.54% on a weekly basis. While defensive stocks supported the day’s gains, Financials and trade sensitive sectors were the biggest drag on the index.
(For today’s session, our aggressive intraday models indicated trading off of the range of 2915-2908. The index bounced back on registering the day’s low only half a point below the lower bound of our trading range! Click here to verify/read the full report.)
Despite charting new highs, the index gained only 0.43% on a monthly basis with a choppy price action as investors weighed strong economic data against trade and political risks. Lacking a meaningful catalyst to bolster it above all-time highs, it index remains range bound, now finding support at the 2910 level.
Amid the ongoing trade rhetoric between the U.S. and its key trading partners, the third quarter, however, closed with a solid 7.20% gain as the domestic economy still shows signs of expansion, coupled with strong quarterly corporate performances.
THE DETAILS (The “How & Why”):
European markets closed broadly lower after Italy’s new government announced its deficit-widening budget for 2019, which will increase the deficit to 2.4% compared to the current 0.80%. Italy’s government bond yields spiked up on the news, causing a major sell-off in its Financials sector. Fear of a financial crisis within the Eurozone was reignited, sending the European markets sharply lower across the board. While the S&P 500 opened the session lower mirroring European markets, it soon revived after a mixed bag of economic data and rising chip stocks boosted optimism.
Defensive stocks outperformed the index on the back of stabilizing bond yields. Utilities, Real Estate, Health Care and Consumer Staples rose modestly by 1.51%, 1.31%, 0.33% and 0.22% respectively. Excluding Health Care, however, defensive sectors closed lower for the month as Treasury yields traded broadl
y higher during the month on the expectations of further monetary tightening by the Federal Reserve.
y higher during the month on the expectations of further monetary tightening by the Federal Reserve.
Some of the strongest performers in today’s session were chip stocks, rallying after an analyst at Evercore ISI hiked the price target for NVIDIA Corp. to $400 from $300, sending its stocks soaring by 5.09%. Intel Corp. and Qorvo Inc. were the other strong performers within the Technology space, up 3.07% and 2.90%.
The Technology sector gained 0.43%, however, limited due to sharp declines in
Advanced Micro Devices Inc., Twitter Inc. and Facebook Inc. by 5.22%, 3.26% and 2.59% respectively. Facebook Inc. shed close to $13 billion in value after the social-media giant admitted that its network was hacked, impacting 50 million users’ accounts.
Financials sector was the biggest drag on the index, extending losses by 1.06% on concerns of a narrowing yield curve. The sector closed the week sharply lower by 4.05%. Energy and Consumer Discretionary were the other under-performers in the session, down 0.26% and 0.13% respectively.
Dollar gained on the back of a falling Euro, sending commodities and metal prices tumbling in today’s session and hurting the Materials sector by 0.68%. Losing 4.48% on a weekly basis, Materials was the worst performing sector this week amid the ongoing trade spat between the U.S. and China.