Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 04/02” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
Mirroring global equities, the S&P 500 opened the second quarter on a positive note. Upbeat manufacturing data out of China eased concerns of a slowing global economic growth and boosted sentiment at the open, which was further fueled by better-than-expected U.S. manufacturing data.
Gapping higher at the open, the index maintained a steady momentum of gains with Financials leading the advances alongside rising Treasury yields. Closing higher for the third session in a row, the index registered a 6-month high and is now only 2.57% below historical highs of September 2018. Except defensive sectors that capped gains in today’s risk-on session, eight out of the eleven primary sectors lifted the index solidly higher to close near session highs at 2867.19, up 32.79 points and gaining 1.16% over previous session’s close.
THE DETAILS (The “How & Why”):
Economic data out of China during the weekend indicated that economic activity in China rose unexpectedly in the month of March following a series of stimulus programs by its government, easing concerns of global economic meltdown. The U.S. ISM’s manufacturing index for March also came in stronger-than-expected at 55.3% compared to the 54.2% in February. Retail sales for the month of February, however, fell unexpectedly by 0.2%.
Treasury yields rose across the board as demand for safe-haven bonds waned amid today’s risk-on sentiment. The 10-year Treasury yield settled above the 3-month Treasury yield for the second straight session at 2.484%. Banking and Financial stocks rallied strongly alongside surging yields to lead the broader index higher with a 2.42% gain. Bank of America Corp., Citigroup Inc., JPMorgan & Chase Co and Morgan Stanley, all jumped more than 3% each.
China-exposed Industrials, Materials and Technology sectors also logged strong gains, closing higher by 2.07%, 1.50% and 1.40%, respectively. Semiconductor stocks build on their previous session’s gains on trade optimism. Microchip Technology Inc. and Autodesk Inc. lead the technology space higher by jumping more than 5% each. FAANG stocks also outperformed, with Netflix Inc. leading the pack with a 2.92% gain.
Meanwhile, improving outlook for the global economy lifted oil prices and commodity prices. Among the other notable gainers were Communication Services, Energy and Consumer Discretionary, up 1.45%, 1.37% and 1.17%, respectively.
Rising Treasury yields, however, hurt interest-sensitive defensive stocks in today’s risk-on session. Utilities, Real Estate and Consumer Staples were the only sectors not participating in gains, closing the session lower by 0.71%, 0.28% and 0.21%, respectively. Abiomed Inc. and Monster Beverage Corp. were the worst decliners of the session, falling 2.74% and 2.38%, respectively. Kellogg Co. fell 2.37% on announcing its plan to sell its famous Keebler and Famous Amos brands to Italy-based Ferrero for close to $1.5 billion.