Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 09/04” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
Primarily driven by trade news, the S&P 500 index closed yet another week with strong gains. Economic strength and strong quarterly corporate performance helped the S&P 500 index to recover from a sharp correction in February and register new record highs. Staying resilient amid trade and geopolitical tensions, the best month of August since 2014 also ended with a strong 2.15% gain.
The index treaded lightly in a minor consolidation phase for the second day in a row as investors remained cautious amid uncertainties around trade talks. Opening lower, the index gained a bullish momentum but was pulled back on reaching the day’s high at 2906.32, as trade skepticism kicked in after the Canadian trade negotiator announced that they were unable to resolve their trade disputes.
The index, however, gained ground in the last hour of trading on hopes that the talks would resume soon. Struggling for direction ahead of the Labor Day long weekend, the index closed a volatile session mostly unchanged at 2901.52, up only 0.39 points. Sector-wise performance was mixed with 6 out of the 11 primary sectors ending the session higher.
THE DETAILS (The “How & Why”):
The U.S. and Canada trade talks closed the Friday’s deadline with no resolution to their long ongoing trade disputes around NAFTA, but officials on both the ends remained positive on resuming negotiations next week. Investors remained cautious amid trade policy uncertainties heading into the Labor Day weekend.
Energy sector led the day’s declines, down 0.73% alongside a fall in oil prices. Oil prices fell on reports of increasing drilling activity and rising U.S. crude oil production. The sector was the only under-performer this month, losing 1.98% on a monthly basis.
Utilities, Telecommunications and Materials sectors were the other notable decliners of the session as trade war concerns continued to weigh on investor sentiment on prospects of new round of tariffs on China. Metal prices extended their slide on the back of a strengthening dollar amid emerging market turmoil, further dragging the Materials stocks lower.
Trading sideways, the 10-year Treasury yield settled relatively unchanged at 2.86%. Financial stocks also closed the session slightly lower by 0.09%. On the other hand, interest-sensitive Real Estate sector led the day’s advances with a 0.42% gain. Technology and Industrials sector closed the session with slight gains of 0.12% and 0.04% respectively.
Retail and store chains were among the best performers in today’s session after getting a major boost from a solid 6.38% rise in Ulta Beauty Inc. The makeup retailer announced its plan to introduce Kylie Cosmetics to its stores ahead of the holiday season. The broader Consumer Discretionary sector was up 0.37%.
However, Goodyear Tire & Rubber Co. offset some of the sector’s gains, losing 4.38% on reporting disappointing quarterly earnings. Several auto makers also under-performed in the session on rising cost concerns after President Trump rejected the European Union’s offer to eliminate tariffs on cars if the offer is matched by the U.S.