Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Friday, 08/17” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
Rebounding from Wednesday’s sharp sell-off, the S&P 500 index bounced back following overnight news of U.S. and China’s plans to resume their stalled trade talks next week. The Emerging Markets currency crisis faded into the background with the Turkish Lira recovering for the third straight day. Upbeat second quarter earnings by Walmart Inc. and Cisco Systems also boosted investors’ confidence.
Gapping up sharply at the open, the index maintained its gains throughout the session on a steady momentum. Bouncing off its 20 DMA support level after breaching it in yesterday’s sell-off, the index closed near session highs at 2840.69 (Closing 1.69 points above our intraday models’ suggested trading pivot band. Click here to read the full text), up 22.32 points and gaining a decent 0.79% over previous day’s close. All of the eleven primary sectors were sharply higher in today’s rebound rally.
THE DETAILS (The “How & Why”):
In an attempt to end their long ongoing trade dispute that could potentially hurt the global economic growth, the U.S. and China announced their plans to resume their long stalled trade discussions next week. Investors cheered the news as a sign of progress towards avoiding a full blown trade war, lifting the index sharply higher at the session open. The Turkish Lira also extended its rally for the third straight day on optimism over freshly infused liquidity from Qatar. Commodities and metal prices trimmed some of their recent losses, boosting the Materials stocks by 0.83%.
Riding on trade optimism, Telecommunications sector was the best performer with a 2.01% gain led by a 3.83% rise in CenturyLink Inc. Boeing Co. gained 4.29% after UBS upgraded the company citing a 50% upside in its stock. Caterpillar gained 3.21%, further lifting the broader Industrials sector higher by 1.16% after reporting a solid 24% increase in its revenues.
Materials and Energy stocks reversed previous session losses, both rising 0.62% each on easing of trade tensions. Consumer Discretionary, Health Care and Utilities were the other notable gainers in today’s rebound rally, up 0.45%, 0.92% and 1.12% respectively.
Walmart Inc. was the top gainer in the index, soaring 9.33% on reporting a solid 40% increase in its U.S. e-commerce sales. The broader Consumer Staples sector was up 1.52% for the session on optimism ahead of earnings release of other retailers after the session close. Technology sector also closed the session higher by 0.25%, erasing some of the previous session losses led by a 2.96% rise in Cisco Systems Inc. on beating earnings estimates.
Easing trade war concerns boosted risk appetite of investors, pushing the Treasury yields higher. Financials and Real Estate sectors benefited from falling yields, closing higher by 1.25% and 0.71% respectively.