Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 11/19” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
Primarily driven by trade optimism, the S&P 500 index extended gains for the second day in a row, albeit ending the week sharply lower amid intense sell-off in Technology and Energy stocks.
Disappointing earnings by NVIDIA Corp. dampened sentiment at the open, dragging the index lower. Trading directionless between gains and losses, the index gained a positive momentum after President Trump told reporters he was hopeful that a fair deal could be reached with China soon, but was soon pulled back after White House officials announced that there was no imminent deal in sight.
Defensive sectors rallied to overshadow Technology weakness to close off of session highs at 2736.27, up 6.07 points and gaining 0.22% over previous session’s close. Intense selling in Technology and Energy sectors weighed down on the index for most part of the week to end with a 1.61% weekly loss. Concerns of peaking corporate earnings, slowing global economy and a strengthening dollar continue to keep the gains capped.
THE DETAILS (The “How & Why”):
Treasury yields inched lower following comments by Federal Reserve officials that the Fed is getting closer to reach its neutral overnight rate, setting the stage for fewer rate hikes than expected. Interest-sensitive sectors were the best performers in today’s session, benefiting from falling yields. Real Estate, Utilities, Health Care and Consumer Staples were all up by 1.36%, 1.31%, 0.94% and 0.22%.
PG&E Corp. and Edison International rebounded from their recent steep losses, soaring 37.54% and 15.38% respectively on hopes that the California state legislators would rescue these troubled utilities from going bankrupt on facing significant liabilities if held responsible for the wildfires that ravaged Northern California.
Materials sector closed the session higher by 0.95%, broadly benefiting from a sliding dollar. The U.S. dollar index edged lower after Federal Reserve officials reiterated their cautious stand about slowing global economic growth that could prevent the central bank from maintaining its current pace of rate hikes.
Health Care, Consumer Staples and Financials were the other sectors supporting day’s gains, up 0.94%, 0.22% and 0.10% respectively. While the Energy sector closed today’s session with a decent gain of 1.10% alongside a recovery in oil prices on hopes of production cuts by the OPEC and its partners, the sector registered a sixth weekly loss in a row, down 2.11% on concerns of oversupply in the wake of a slowing global economy.
Consumer Discretionary was the worst performing sector this week, down 3.78% on a weekly basis, weighed down by declining retail stocks ahead of the holiday season. The sector shed 0.54% in today’s session, led by a sharp drop in Nordstrom Inc. The departmental store chain plunged 13.66% on missing earnings estimates, citing a $72 million charge for credit card refunds to customers that were incorrectly charged higher interest rates.
Technology sector was dragged lower by NVIDIA Corp. The chip designer was the worst decliner of the session, tumbling 18.76% on missing quarterly revenue estimates and guidance, citing the fading craze of cryptocurrency mining. Activision Blizzard Inc. and Advanced Micro Devices Inc. were the other sharp decliners within the sector, down 4.89% and 3.86% respectively.