Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Friday, 06/07” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
The Fed-led rally extended into its third session. Struggling for direction and flirting with its 20 DMA (now at 2826.90) during the early hours, the S&P 500 index received a strong boost in the afternoon session on reports that the Trump administration could postpone tariffs on Mexican goods that are expected to go into effect next week as talks on immigration issue progresses.
Energy stocks staged a strong rebound to lead the day’s gains as oil prices bounced back from their 5-month lows. With all sectors trading higher for the day, the index closed near session highs at 2843.49, up 17.34 points and gaining 0.61% over previous session’s close.
THE DETAILS (The “How & Why”):
Brushing aside concerns of rising supply glut, oil prices rallied after hitting their 5-month lows in the previous session. Energy was the best preforming sector in today’s broad-based rally, leading the advances with a 1.73% gain. TechnipFMC PLC, Occidental Petroleum Corp. and Baker Hughes a GE Co. were the top gainers within this space, all jumping more than 3% each.
Materials, Technology and Consumer Staples were the other notable gainers of the session, up 1.13%, 1.09% and 0.81%, respectively. Morgan Stanley upgraded Advanced Micro Devices Inc. citing near-term positive catalyst, boosting the chipmaker by 7.86% to be the top gainer of the session. Other chipmaker stocks also traded higher in-tandem. Meanwhile, International Flavors & Fragrances Inc. jumped 5.23% on beating earnings estimates, lifting the Materials sector higher.
The 10-year Treasury yield settled slightly higher at 2.124% amid easing trade tensions between U.S. and Mexico, supporting today’s broad-based rally. Investors will be looking forward to the Friday’s jobs report looking for cues on the state of economy, especially after a disappointing employment report.
Defensive sectors lagged the broader index alongside stabilizing yields. Utilities, Health Care and Real Estate gained 0.44%, 0.32% and 0.15% respectively. Industrials was the worst laggard of the session, closing mostly unchanged on the back of weakness in transportation and airline stocks that are vulnerable to trade tensions between the U.S. and Mexico. Kansas City Southern, Norfolk Southern Corp., Union Pacific Corp. and Alaska Air Group Inc. all shed more than 1% each.