Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 03/05” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
Building on previous session’s trade optimism, the S&P 500 index gapped higher at the open following weekend news that the U.S. and China are nearing an agreement to end their long-standing trade spat. The index, however, pulled back sharply on registering the day’s high at 2816.88. Lack of details around the deal, weaker-than-expected economic data and some disappointing earnings overshadowed trade optimism to drag the index to a two-week low and back below the technical resistance level of 2800.
While all of the eleven primary sectors experienced intense selling for most part of the session, technology and defensive stocks reversed some of the early session losses to help the index stabilize in the afternoon session. With Health Care sector leading the declines, the index closed the session off of session lows at 2792.81, down 10.88 points and losing 0.39% over previous session’s close.
Today’s price action tested our models’ upper bound level, pulling back fractionally before hitting 2817 and closing the session only 0.19 point below our intraday model’s lower bound level. Click here to verify this claim.
THE DETAILS (The “How & Why”):
Mirroring Asian markets, the S&P500 index opened near the November highs after a weekend report that the U.S. and China could reach at a trade agreement as early as this month. Optimism soon lost steam as investors waited for details around the trade deal.
Meanwhile, U.S. construction spending came in at a below-than-expected decline of 0.6% after a record increase in construction activities in the previous year, indicating the construction spending in both private and public projects fell unexpectedly in December.
Health Care sector led the day’s declines, closing sharply lower by 1.34%. Health insurance and drugstore chain stocks were among the worst performers of today’s session. WellCare Health Plans Inc. tumbled 6.08%, while Anthem Inc., Humana Inc., Centene Corp and UnitedHealth Group Inc. all fell more than 4% each on the back of last week’s ‘Medicare for all’ bill issued to eliminate most private health insurance plans that duplicates benefits offered by the government.
Treasury yields fell alongside a rise in demand for safe haven assets amid an intense selling in equities, hurting banks and financial stocks. Financials, Industrials and Technology sectors were the other notable decliners of today’s session, closing lower by 0.62%, 0.48% and 0.39%, respectively.
CenturyLink Inc. was the worst performer of the session, falling 6.25% after the wireless telecom requested the U.S. Securities and Exchange Commission to extend the deadline for filing its 2018 annual report, indicating material weaknesses in the company’s internal controls over accounting procedures.
Salesforce Inc. was the biggest drag on the Technology sector, falling 3.66% ahead of its earnings release. The software company shed another 3% during after-hours trading on disappointing forecast.
On the positive side, limiting losses within the broader index were Materials, Real Estate and Utilities, closing higher by 0.45%, 0.41% and 0.21%, respectively. Oil prices traded higher for the day on hopes of a ‘potential’ trade deal and production cuts by OPEC, benefiting Energy sector by 0.20%.