Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Friday, 01/11” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
Extending its best winning streak since September 2018, the S&P 500 index closed today’ session higher for the fifth straight session, albeit on a whipsaw price action as strength in the defensive sectors overshadowed weakness in retail and airline industry.
Disappointing holiday sales numbers reported by Macy’s Inc. and guidance cut by American Airline Groups Inc. dampened confidence at the open. The index, however, reversed trend on registering the day’s low at 2562.02 alongside Federal Reserve Chairman Jerome Powell’s reiteration of a cautious approach towards further rate hikes.
Whipsawing thereafter, the index managed to close the session higher for the fifth straight session at 2596.64, up 11.68 points and gaining a decent 0.45% over previous session’s close. Ten out of the eleven primary sectors traded higher for the day with gains in Real Estate and Industrials sectors overshadowing weakness in Consumer Discretionary sector.
THE DETAILS (The “How & Why”):
Leading the advances in today’s volatile session was Real Estate sector, up by 1.55% on expectations of easing interest rates. Among other defensive sectors, Utilities rebounded from recent weakness, closing the session higher by 1.41%. Consumer Staples and Health Care closed modestly higher by 0.61% and 0.24%. Constellation Brands Inc. bounced back after leading declines in the previous session, rising 5.96% to lead the broader Consumer Staples sector higher today.
American Airlines Groups Inc. tumbled 4.13% after lowering its 2018 earnings outlook, citing disappointing domestic fares. While other airline stocks were dragged lower at the open, they regained ground by the end of the session. The broader Industrials sector, however, closed the session higher by 1.44%. Trade-sensitive Boeing Co, Deere & Company and Caterpillar Inc. were the top gainers within the sector on the back of optimism surrounding a potential U.S. – China trade deal, gaining 2.55%, 3.10% and 2.06%, respectively.
Materials and Technology were the other notable gainers of the session, up 0.87% and 0.46% respectively. Oil prices rose for the ninth session in a row on easing of concerns of global oversupply, lifting Energy sector higher by 0.33%.
Rising yields continue to benefit banks and other financial stocks. The Broader Financial sector cl
osed the session slightly higher by 0.12%. While the Federal Reserve Chairman Jerome Powell reiterated the central bank’s cautious approach towards future rate hikes, he also highlighted his concerns of rising deficits and the negative impact of a prolonged government shutdown on the economy. Investors will be keenly looking forward to earnings results of major banks like JP Morgan Chase & Co, Goldman Sachs and American Express, looking for clues of slowing earnings growth going forward.
Capping the day’s gains were weakness in Consumer Discretionary sector. Macy’s Inc. tumbled 17.69% in its worst trading day on record and sparking a major sell-off in retail stocks after reporting a disappointing holiday season sales numbers and slashing its 2018 earnings forecast. Kohl’s Corp also declined 4.81% on reporting a slowing growth in its same-store sales growth. L Brands Inc., Nordstrom Inc. and Gap Inc. were the other major decliners of the session, down 4.39%, 4.04% and 3.11% respectively.