Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 04/22” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
The S&P 500 index closed the holiday-shortened week with a slight gain as solid earnings out of major Industrials outweighed weakness in Energy and Financial stocks. A strong batch of economic data lifted the index higher at the open. Gains soon faded alongside falling energy and bank stocks. Upbeat quarterly performance by Snap-on, Honeywell, United Rentals Inc. and Union Pacific helped improve sentiment in the afternoon session.
Maintaining slight gains for most part of the latter session, the index closed near session highs at 2905.03, up 4.58 points and gaining 0.16% over previous session’s close. Seven out of the eleven primary sectors closed the choppy session higher, with Industrials leading the advances.
THE DETAILS (The “How & Why”):
On the economic data front, retail sales rebounded strongly from last month’s decline, rising 1.6% compared to the expected 0.8%. Initial jobless claims also hit a 50 years low at 192,000, compared to the expected reading of 206,000, reinforcing strength in economy. While the U.S. dollar strengthened on upbeat economic data, Treasury yields edged lower.
In earnings news, United Rentals surged 8.14% to be the top gainer of the session after the construction equipment rental specialist beat earnings by strong numbers. Snap-on Inc., Union Pacific Corp. and Honeywell International Inc. jumped 6.48%, 4.36% and 3.79%, respectively, providing a solid lift to the Industrials sector to lead the day’s advances by 1.11%. On the other hand, Genuine Parts Co. was the worst decliner of the session on missing earnings estimates, tumbling 6.33%.
Real Estate sector was the other notable gainer of the session, benefiting from falling yields and closing the session higher by 0.75%. Health Care sector took a breather from brutal sell-off in recent sessions on rising risks of policy changes, sporting slight gains of 0.14%. Humana Inc. and HCA Healthcare Inc. led the sector with 3.35% and 2.88% gains. Anthem Inc., Cigna Corp., UnitedHealth Group Inc. and Centene Corp. all reversed their recent losses and rose more than 1% each.
Technology, Communication Services and Materials sectors lagged in gains. While semiconductors were the weakest performers within the Technology space, a slide in copper prices limited gains in Materials.
Oil prices settled higher, albeit on a choppy price action following reports of falling U.S. inventories and a drop in exports from Saudi Arabia. Energy sector, however, settled 0.53% lower on the back of disappointing earnings by Schlumberger Ltd. The oilfield service provider fell 3.90% and dragged other energy stocks lower after it warned that shale activity within North American will be weaker this year. EQT Corp. and Cabot Oil & Gas Corp. were the other major drag on the sector, down 3.86% and 3.37%, respectively.
Robust earnings by JP Morgan Chase & Co, Blackrock Inc. and Morgan Stanley helped lift banking and financial stocks this week. The sector however gave back some of the recent strong gains in today’s session amid sliding yields and mixed results reported by Regions Financial Corp. and KeyCorp.
A decent start to the earnings season, coupled with signs of improving Chinese economy helped to outweigh the impact of brutal sell-off in Health Care sector. While the index continues to consolidate near all-time highs registered in September 2018, shrinking trading volume indicates lack of participation and remains a cause of concern.