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”)
Exuberance following positive trade headlines that mostly lacked in details, coupled with renewed hopes of a Brexit deal powered the S&P500 index solidly at the open. Surging above critical resistance levels on hopes of a potential trade truce, the index snapped a 3-week slide and closed the volatile week that was primarily driven by trade headlines in the positive territory.
A late-session sell-off amid uncertainty over existing tariffs and December tariffs trimmed some of the day’s gains, pushing the index to close well-off of session highs at 2970.27, up 32.14 points and gaining 1.09% over previous session’s close.
THE DETAILS (The “How & Why”):
Early morning reports that U.S. and China have agreed upon a partial deal that will lay down the groundwork for a broader agreement, bolstered stocks at the open. Trade-vulnerable stocks traded solidly higher on optimistic trade headlines that mostly lacked in details.
Treasury yields also jumped across maturities amid easing of trade jitters. Improving chances of a Brexit deal sparked a sell-off into European bond markets, boosting the yields further. The 10-year Treasury yield settled 6 basis points higher at 1.732%.
Bond-proxy sectors failed to participate in the day’s strong rally alongside rising yields. Utilities posted the worst gains of the session, down 0.35%, led by a 3.85% decline in Edison International. Real Estate and Consumer Staples were the only other sectors to close slightly lower. Gold prices slipped amid easing trade tensions, weighing down on Newmont Goldcorp Corp., the only gold mining stock, by 3.39%.
Industrials and Materials were the best performing sectors, sharply higher by 1.97% and 1.91%, respectively. Technology, Financials and Consumer Discretionary all posted gains more than 1% each. Energy stocks were the other major gainers, up broadly by 1.40% with oil prices climbing more than 2% following reports of attacks on an Iranian tanker in the Red Sea.
Fastenal Co., a distributor of supplies for manufacturing and construction that is considered a bellwether for industrial activity, skyrocketed 17.15% to a record close on beating sales and profit expectations. Apple Inc. extended its previous session’s gains by 2.66% to hit another record high.
The broader index, however, gave back some of the day’s gains going into the close after the announcement of the terms of the partial deal that is yet to be signed off. As part of the first phase, China will purchase around $50 billion worth of U.S. agricultural products in exchange of the U.S. holding off on the additional tariffs that were set to go into effect on October 15.
Uncertainty around existing tariffs and next round of tariffs that are scheduled for December sparked a late-session sell-off. The index, however, closed the session with solid gains and reversed early week’s massive losses. Investors will now turn their attention to the third quarterly earnings season that will kick off in earnest with major banks including Goldman Sachs, JPMorgan & Chase and Citigroup all scheduled to report next week.