Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Friday, 05/17” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
Building on Wednesday’s rally, the S&P 500 index closed higher for the third straight session buoyed by better-than-expected economic data, coupled with strong earnings by Walmart Inc. and Cisco Systems Inc. Brushing aside the latest escalation in trade tensions after President Trump signed an executive order to bar U.S. companies from buying telecom equipment from sources deemed as a national security threat, investors remain cautiously optimistic that a mutually beneficial resolution to the long ongoing trade dispute could be possible.
Strong early session gains, however, faded in the afternoon session alongside sliding semiconductor stocks. The index closed off of session highs at 2876.32, up 25.36 points and gaining 0.89% over previous session’s close. All of the eleven primary sectors closed modestly higher, with Materials and Financials leading the advances.
THE DETAILS (The “How & Why”):
Reports that President Trump signed an executive order to bar U.S. companies from buying telecom equipment from sources deemed as a national security threat while adding the Chinese telecom giant Huawei Technologies Co to the list of companies that pose a threat to American interests, failed to dampen sentiments as investors remain cautiously optimistic that a mutually beneficial trade deal is possible.
While investors continued to buy back the beaten down technology stocks that were brutally sold off early this week on escalating fears of a full-blown trade war, semiconductor stocks were sent tumbling in today’s session in the wake of the Trump administration’s restriction on Huawei Technology Co. Xilinx Inc., Qorvo Inc. and Skyworks Solutions Inc. were among the worst decliners of the session, falling more than 6% each.
Qualcomm Inc., Analog Devices Inc. and Micron Technology Inc. were the other worst performers of the session, losing 4%, 2.96% and 2.86%, respectively. Meanwhile, Cisco Systems Inc. partially offset these declines, jumping 6.66% on posting a better-than-expected quarterly results and a strong outlook.
Materials sector led the index higher, closing with a 1.34% gain. Treasury yields settled higher following better-than-expected economic data. The U.S. weekly jobless claims fell unexpectedly to 212,000, as against the expected claims of 217,000. Separately, new home construction rose 6% in April and the Philadelphia Fed’s manufacturing index rose to a four-month high in May to 16.6. Rising yields helped lift financial stocks and erase their previous session’s weakness, closing higher by 1.10%.
Retail stocks traded higher after Walmart Inc. beat earnings expectation with sales rising for the fourth consecutive year on the back of improving online sales and growing market share. The retail giant rose 1.40% after it provided an optimistic outlook despite the challenging trade environment.