Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Tue, 07/24” will be posted Mon, 07/23 night – please check back around 10:30pm/11pm EDT.
THE GIST (“THE WHAT”)
Opening lower following a war of words between President Trump and the Iranian counterpart Hassan Rouhani on Sunday evening, the S&P 500 index gained a bullish momentum with Financials stocks in the lead in an otherwise lackluster session. With 35% of S&P 500 companies due to release earnings reports this week, prices continue to be driven by corporate performances as investors put geopolitical risks and trade tensions on the backburner for now.
Bouncing off the day’s low of 2795.14 as Treasury yields inched up fueling gains in Financials sector, the index closed near session highs at 2806.98, gaining for the first time in three days, up 5.15 points and a slight 0.18% over previous session’s close. Eight out of the eleven primary sectors ended the session lower.
THE DETAILS (The “How & Why”):
The index opened Monday’s session on a weaker note as trade tensions continue to linger in the background. The keenly watched G-20 meet ended with little progress as both European and U.S. counterparts stuck to their guns on trade issues. Meanwhile, geopolitical tensions were revived amid a war of words between President Trump and Iranian President Rouhani. In a hostile tweet Sunday evening, President Trump delivered a strong warning to Iran not to threaten the U.S. or face consequences like never before. Investors chose to ignore the rhetoric as a busy earnings season kicks in.
Financial stocks led the day’s gains, up 1.32% fueled by a rise in Treasury yields. In a largest one-day rise since June 1, yields edged up mirroring a spike in Japanese bond yields that rose to their two-year highs after Bank of Japan hinted at scaling back its monetary stimulus program sooner than expected in an effort to combat low inflation.
The 10-year Treasury yield settled 11 basis points higher at 2.96%.
The 10-year Treasury yield settled 11 basis points higher at 2.96%.
The broader Technology sector also supported the day’s gains, up 0.54% ahead of the earnings release by tech giants FANG stocks this week. Broadcom Inc. was the best performer within the sector with a 3.04% gain. Meanwhile, stocks of Alphabet Inc. soared to record highs in after-hours trade on beating expectations despite accounting for a record anti-trust fine by the European Union.
Health Care was the only other sector ending the session higher, up 0.24%. Dentsply Sirona Inc. and Universal Health Services Inc. led the sector with 3.33% and 2.51% gain respectively. Hasbro Inc. was the top gainer in the index, spiking 12.89% on beating expectations followed by a 3.88% rise in stocks of rival Mattel Inc. On the other hand, yield sensitive Utilities, Real Estate and Consumer Staples shed 0.64%, 0.23% and 0.53% respectively.
Lingering geopolitical and trade tensions, along with a fall in commodities and oil prices hurt Industrials, Materials and Energy st
ocks by 0.62%, 0.50% and 0.39% respectively. Halliburton Co. and Illinois Tool Works Inc. were the biggest losers within the index, down sharply by 8.10% and 7.22% respectively.
ocks by 0.62%, 0.50% and 0.39% respectively. Halliburton Co. and Illinois Tool Works Inc. were the biggest losers within the index, down sharply by 8.10% and 7.22% respectively.