Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
For the Outlook, Forecast, and Trading Plans published this morning, please click here
For the Results of the morning’s Trading Plans, please click here.
THE GIST (“THE WHAT”)
Investors continued to cheer the solidified expectations of a July-end Fed rate cut, brushing aside a jump in inflation reading. A lackluster 30-year Treasury notes auction, coupled with a tweet by President Trump complaining that China is not buying U.S. agricultural products as much as promised dented sentiment mid-session that dragged the index briefly into negative territory.
Finding strong resistance at the all-time highs, the index chopped around within a relatively narrow range. A strong late-session rebound nudged the index higher to close fractionally below the historic mark at 2999.91, up 6.84 points and gaining 0.23% over previous session’s close. Modest gains across sectors were suppressed by weakness in Real Estate stocks alongside rising yields.
THE DETAILS (The “How & Why”):
Treasury yields surged after June’s CPI reading came in slightly above expectations. The 10-year Treasury yield settled at its four-week high at 2.122%, lifting banks and financial stocks. A sluggish demand at the 30-year Treasury note auction further supported rising yields. Goldman Sachs Group Inc., Morgan Stanley and Charles Schwab Corp. all traded more than 2% apiece, lifting the broader Financials sector by 0.60%.
Reports that the Trump administration has dropped its plan to end rebates that the drug manufacturers pay to pharmacy-benefit managers send the pharmaceutical stocks soaring. Cigna Corp., Anthem Inc. and UnitedHealth Group Inc. were the top gainers of the session, jumping 9.24%, 5.54% and 5.53%, respectively. CVS Health Corp., Humana Inc. and Abiomed Inc. were the other strong performers of the session, all gaining more than 4% each.
Industrials and Materials erased some of their recent losses and posted modest gains on the back of weak dollar that slipped to its one-week low. Airline stocks got a slight boost from better-than-expected earnings reported by Delta Air Lines Inc. The airlines operator provided a solid 2019 earnings outlook, citing growing demand for its premium-class cabins and its non-dependence on Boeing 737 Max jets, which its rivals have been grappling with.
On the other hand, investors sold-off interest-sensitive defensive stocks in favor of safe-haven bonds amid rising Treasury yields. Real Estate was biggest drag on the index, down 1.21% led by a sharp 7.48% decline in Iron Mountain Inc. after Bank of America Merrill Lynch downgraded its stock to ‘underperform’ from ‘neutral’.