Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
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THE GIST (“THE WHAT”)
Busy week of high profile earnings opened on a positive note amid positive rhetoric around the phase one of partial U.S. – China trade talks. Breaching the closely-watched 3000 mark, the S&P500 index closed above this psychological level for the first time since September 19.
Opening higher and maintaining a steady stream of gains throughout the session, the index closed near session highs at 3006.72, up 20.52 points and gaining 0.69% over previous session’s close. Energy and Financials led the day’s advances. Low trading volume, however, still remains a cause of concern and poses liquidity risks.
THE DETAILS (The “How & Why”):
China hinted at its willingness to increase its purchases of U.S. agricultural products and give some concessions in intellectual property rights, financial services and currency in exchange of revocation of tariffs due to go into effect in December. Confirming the reports, White House economic advisor Larry Kudlow said that the ‘phase one’ talks went well and December tariffs could be revoked.
Treasury yields edged higher amid improving sentiment around trade talks, booting financials and bank stocks. The 10-year Treasury yield jumped 4 basis points higher to settle at 1.80%. Bank of America Corp, Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley climbed more than 2% apiece.
Energy stocks also soared on trade optimism despite oil prices sliding in the background to a near 2-week low. Halliburton Co surged 6.40% on meeting earnings estimates and providing a detailed plan for further cost reductions in an attempt to maintain competitive advantage. EOG Resources Inc. and Helmerich & Payne Inc. further fueled the gains, jumping more than 5% each.
Technology stocks were the other notable gainers, led by China-exposed semiconductor stocks. Apple Inc. also extended gains and jumped 1.73% higher following a hike in price target by Raymond James, citing potential of iPhone 11. Adding to the day’s gains, Coty Inc. was the best performer of the session, skyrocketing 13.44% after the cosmetics maker announced its plan to sell its professional beauty business in an attempt to improve its debt to equity profile.
On the other hand, Boeing Inc. capped the day’s strong gains, extending its sharp declines by another 3.76% following multiple stock downgrades following a string of troubling reports around its grounded flagship 737 Max jets. McKesson Corp, Cardinal Health Inc. and AmerisourceBergen added to the day’s declines, after these three drug distributors along with Teva Pharmaceutical Industries Ltd agreed to pay $260 million to settle opioid litigation.