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 last published Results of the Morning Trading Plans, please click here.
THE GIST (“THE WHAT”)
Conflicting news around U.S. – China trade tensions kept investors on the edge as they grapple with recession jitters in the background. Struggling for direction, the S&P 500 index whipsawed within a relatively narrow range following its worst session in 2019. Bonds and other safe-haven assets remained in demand amid several economic and geopolitical headwinds.
A late-afternoon session rally, however, lifted the index higher to close near session highs at 2847.60, up by 7 points and gaining 0.25% over previous session’s close. Investors preferred defensive stocks in the wake of low yields. Nine out of the eleven primary sectors traded higher; with Consumer Staples leading the advances after stronger-than-expected earnings by Walmart Inc. improved sentiment within the battered sector.
THE DETAILS (The “How & Why”):
China threatened to take necessary countermeasures against U.S. tariffs, sending overnight futures lower. Sentiment improved after China signaled willingness to compromise. The 10-year Treasury yield continued its slide, hitting its lowest level since August 2016 at 1.5%. The spread between the 2-year and 10-yields flirted with the inversion point after falling briefly into negative territory in the previous session that spooked investors and sparked a dramatic selling in equities.
Retail stocks recovered from previous session’s bloodbath after Walmart Inc. improved sentiment by raising its annual guidance, despite the looming China tariffs. The retail giant was the best performer of the session, jumping 6.11% on beating second quarterly earnings estimates. Stronger-than-expected retail sales data further helped boost confidence about U.S. consumer segment.
Consumer Staples sector posted the strongest gains in today’s volatile session, up 1.51% led by Walmart Inc. Kellogg Co and Brown-Forman Corp were the other strong performers within this space, gaining more than 3% each. Dividend-paying and defensive names posted strong gain in today’s choppy session as yields remain at their multi-year lows. Real Estate and Utilities benefited the most by 1.41% and 1.38%, respectively.
Communication Services, Health Care and Financials sectors also gained some of their lost ground and posted modest gains. Except Netflix Inc. and Apple Inc. that extended weakness into the second straight session, all the other FAANG components managed to recover from previous session’s slump and posted modest gains.
Meanwhile, growing recession fears and concerns of a supply glut weighed down on oil prices for the second session in a row. Energy stocks limited the day’s gains, closing 0.52% alongside a more than 1% decline in oil prices. A sharp 11.30% plunge in GE Inc. weighed down heavily on the Industrials space. The struggling conglomerate tumbled the most in over a decade after Madoff whistleblower Harry Markopolos accused the company of accounting fraud, claiming that it hid almost $40 billion in losses.