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THE GIST (“THE WHAT”)
Buoyed by stronger-than-expected earnings and de-escalating trade tensions, the S&P 500 index printed a new record daily close. Extending the overnight rally, the index spiked at the open to fresh intraday highs at 3044.08. Hovering around these levels throughout the session, the index closed near session highs at 3039.42, up 16.87 points and gaining 0.56% over previous session’s close.
THE DETAILS (The “How & Why”):
Affirmation by President Trump that the U.S. and China are ahead of schedule to sign a substantial portion of the partial trade deal boosted sentiment at the open. Technology and Communication Services led the advances with a 1.26% and 1.17% gain, respectively.
Microsoft Corp. jumped 2.46% to record highs on beating Amazon.com Inc. in winning a defense contract from Pentagon worst $10 billion for its cloud computing services. Apple Inc. hit a yet another record high, jumping 1% ahead of its highly anticipated third quarter earnings report on Wednesday. Lam Research Corp and Qualcomm Inc. led the chip stocks higher by 4.15% and 3.59% respectively.
Boosting the Communication Services space was a 4.39% jump in AT&T Inc. The media giant delivered a mixed third quarter results and missed revenue estimates due to falling premium TV subscriptions. Investors brushed off the weaker-than-expected results while cheering the media giant’s three-year capital allocation plan that included selling off $10 billion worth of their non-core businesses.
Tiffany & Co. skyrocketed 31.63% to be the top gainer of today’s rally following reports of a $14.6 billion buyout offer from French luxury giant LVMH Moet Henness.
Meanwhile, Treasury yields edged higher ahead of the keenly awaited Fed monetary policy decision on Wednesday. Easing Brexit fears and better-than-feared earnings also helped wane the demand for safe haven bonds. The 10-year Treasury yield hit a six week high, settling at 1.844%, benefiting bank stocks.
Rising yields sparked a rotation out of defensive stocks, capping the day’s strong gains. Utilities and Real Estate were the biggest drag on the index, down 1.31% and 1.08%. Health Care, however, bucked the trend and closed 1.04% higher led by strong gains in biotech space. Nektar Therapeutics, Illumina Inc. and Edward Lifesciences Corp. surged 6.12%, 4.62% and 3.89%, respectively.