Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 12/4” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
Weekend news of a temporary trade truce between the U.S. and China at the closely watched G-20 Summit in Argentina lifted sentiment at the open. De-escalation of trade tensions boosted trade-dependent Technology and Industrial stocks. Energy stocks also rallied on the back of surging oil prices, further fueling gains in today’s broad-based rally.
Gapping significantly higher at the open, the index lost momentum on registering the day’s high at 2800 as investors digested the implication of the trade truce on the domestic market. However, regaining the critical technical levels of 200 DMA and 50 DMA, the index closed off of session highs at 2790.37, up 30.20 points and gaining 1.09% over previous session’s close. Ten out of the eleven primary sectors traded higher for the days, led by Energy and Consumer Discretionary.
THE DETAILS (The “How & Why”):
The closely watched meeting between President Trump and his Chinese counterpart Xi Jinping ended with an agreement to temporarily hold off on any rise in trade tariffs while they continue their negotiations for the next 90 days to come to an agreeable trade deal. China also agreed to purchase a substantial amount of agricultural and energy products from the U.S., the details of which however were undisclosed.
Energy led the index higher, up a solid 2.28% alongside a rally in oil prices ahead of the keenly awaited meeting between the OPEC and its trading partners. Reports that Russia and Saudi Arabia have agreed to cap their oil production in an attempt to curtail the global supply glut, coupled with de-escalation of trade tensions fueled the rally in oil prices.
Consumer Discretionary and Technology sectors rose 2.21% and 2.11% respectively as investors piled up on China-dependent semiconductors and auto stocks that have been weighed down by trade tensions over the last few months. Auto stocks rose broadly higher on news that China has agreed to lower tariffs on U.S. made cars. Ford Motor Co. and General Motors Company rose 2.02% and 1.32%.
Advanced Micro Devices Inc., Wynn Resorts Ltd and Twitter Inc. were some of the top gainers of the session, up 11.31%, 9.50% and 7.03% respectively. Amazon.com Inc. led the FAANG stocks higher, rising 4.86%. Facebook Inc., Apple Inc., Alphabet Inc. and Netflix Inc. all closed higher by 0.34%, 3.49%, 0.60% and 1.46% respectively.
Deere & Company, Boeing Company and Caterpillar Inc. led the broader Industrials sector higher on the back of a relief in trade tensions between the U.S. and China. These Chinese-market dependent companies rose 4.73%, 3.81% and 2.42% respectively, lifting the broader Industrials sector higher by 1.16%. A softening dollar also benefited the Materials sector to close the session higher by 1.75%.
Financials sector was the other modest gainer of the session, up 0.47%. Treasury yields pulled back from their overnight rally, declining alongside paring gains in equity markets. While the 2-year and 10-year Treasury yield curve narrowed the most since 2007 to 16 basis points, the 3-year and 5-year yield curve inverted briefly. The 10-year Treasury yield fell below the psychologically important 3% mark, settling at 2.99%, at its lowest level since September 13.
Defensive stocks lagged the broader index with rising risk appetite in today’s session. Utilities, Health Care and Real Estate close
d higher by 0.88%, 0.44% and 0.36% respectively. Consumer Staples was the only drag on the index in today’s broad-based rally, down slightly by 0.09%.
d higher by 0.88%, 0.44% and 0.36% respectively. Consumer Staples was the only drag on the index in today’s broad-based rally, down slightly by 0.09%.