Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 08/28” will be posted around 8:30am EDT, Tuesday.

THE GIST (“THE WHAT”)

The S&P 500 index registered record all-time highs for the second straight day as trade sensitive sectors rallied on optimism over the U.S. – Mexico trade deal. Opening significantly higher, the index registered the day’s high at 2898.25. Maintaining the gains on a steady momentum, the index closed near session highs at 2896.74, up a solid 22.05 points and gaining 0.77% over previous day’s close. Nine out of the ten primary sectors closed the session higher in today’s broad-based rally.

THE DETAILS (The “How & Why”):

Investors cheered on news that the U.S. and Mexico have reached a new tentative agreement after months of negotiation and tit-for-tat tariffs spat. President Trump also announced his intention to drop the name ‘NAFTA’ from the existing deal that includes Canada. Materials and Industrials sectors rose solidly higher by 1.47% and 1.22% to lead the index to record highs. The new trade agreement would require that to be exempt from tariffs any car sold in North America should have 75% of its parts produced in North America.
Auto and auto part makers rose on the potential advantage over Mexican companies. General Motors and Ford Motor Company climbed 4.84% and 3.15% respectively, lifting the broader Consumer Discretionary sector up by 0.70%. Railroad stocks were also sent higher on expectations that the new deal would benefit railroad companies that span across Mexico, Canada and the U.S. Kansas City Southern was among the top gainers, up 4.69%.
Metals and commodities also edged up higher with the dollar under pressure on easing of trade tensions. Technology and Energy sectors were the other notable gainers in the session, up 0.96% and 0.74% respectively. Financial stocks benefited from falling yields, rising 1.34% as demand for safe haven bonds fell on easing of trade war concerns. However, yield sensitive Utilities and Real Estate were the only sectors to limit the day’s gains, down 0.64% and 0.08% respectively with a rising risk appetite for stocks in today’s session.