Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Friday, 01/18” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
Extending gains for the third straight session, the S&P 500 index closed today’s wild session higher as investors weighed mixed earnings results against better-than-expected economic data that eased recession jitters.
Disappointing earnings by Morgan Stanley dampened confidence at the open. Price action was relatively subdued for most part of the session as investors digested mixed earnings results across sectors. Taking a sharp leg higher, the index regained the resistance of key technical level of 50 DMA (now at 2626.80) following reports that the U.S. might consider easing tariffs on Chinese goods in an effort to hasten a trade deal.
Registering the day’s high at 2645.06, the index soon pulled back after the Treasury Department declined the news reports. With all eleven primary sectors closing higher for the day, the index closed off session highs at 2635.96 (Right above the level our models predicted the index could face strong resistance at! Click here to read the full text.)
THE DETAILS (The “How & Why”):
Trade sensitive Materials and Industrials sectors led today’s advances; up 1.68% and 1.65% on U.S. – China trade optimism. PPG Industries led the Materials space, jumping 4.70% on beating earnings estimates. Eastman Chemical Company also fueled the gains, rising 3.05% following stock upgrade by Morgan Stanley.
Leading the Industrials space higher was Fastenal Company. The Minnesota-based construction supply company rose 5.95% on reporting strong quarterly earnings. Transportation and Airline stocks rose broadly higher alongside a fall in oil prices. Companies most sensitive to trade tensions Caterpillar Inc. and Boeing Company also rose 2.19% and 2.00%, respectively.
Energy sector traded lower for most part of the session alongside a slide in oil prices, but erased weakness on the back of trade optimism to close the session higher by 0.98%. Health Care, Consumer Discretionary and Financials were the other strong performers in today’s wild session, closing the session higher by 0.90%, 0.68% and 0.54%, respectively.
Morgan Stanley tumbled 4.41%, weighing down on the broader Financials sector on missing revenue estimates due to weaker-than-expected trading and wealth management business. Sentiments within the sector improved late session after Treasury yields edged higher on trade optimism and better-than-expected economic data, boosting the sector to close the session higher by 0.54% for the tenth consecutive session.
Tech-heavy Technology and Communication sectors also added 0.67% and 0.38%. Semiconductors were the strongest performers within the tech space, led by Applied Materials Inc., Advanced Micro Devices and Analog Devices, all rising by more than 2.00% each. While Netflix rose 0.51% intraday ahead of its earnings release, the video streaming giant tumbled 3.00% in after trade hours on topping profit estimates but missing revenue estimates.
Gains within the defensive sectors lagged the broader index in today’s risk-on sentiment. Real Estate, Utilities and Consumer Staples all traded higher by 0.47%, 0.42% and 0.39%, respectively.