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”)
Signs of recession flashed by bond markets revived recession fears, dragging the S&P 500 index lower to close the choppy volatile session mostly unchanged at 2922.95, down only 1.48 points over the previous session’s close.
Opening higher on the back of strong earnings, the index retreated sharply following hawkish comments by few Fed members ahead of the keenly-awaited speech by Jerome Powell at the Jackson Hole. Trimming early session losses, the index grinded higher as yields stabilized and defensive sectors gained strength alongside historically low yields. A sharp pullback within the last few minutes of trading, however, erased slight gains to close the choppy session mostly unchanged.
THE DETAILS (The “How & Why”):
Treasury yields edged lower after the lowest reading of PMI data in over a decade suggested a contraction in manufacturing activity. Signs of economic weakening pushed the Treasury yields lower across the curve. The yield curve briefly inverted once again after hawkish comments by Philadelphia Fed President Patrick Harker and Kansas City Fed President Esther George pushed the 2-year Treasury yield above the 10-year yield, sparking a sell-off in equities.
The yield curve flirted with the flat line for most part of the remaining session. All eyes are now on Jerome Powell’s speech in Jackson Hole on Friday. Investors will be closely looking for hints for further monetary easing in the face of relentless criticism from President Trump, despite the lack of consensus between the Fed members.
Financials posted the strongest gains of the session, up 0.62% as yields stabilized late session. Real Estate and Consumer Staples were modest gainers amid low yields. On the other hand, Materials, Health Care and Energy were the weakest performers of the session.
Among strong individual movers, Nordstrom Inc. and Keysight Technologies Inc. were the top gainers of the session, both soaring 15.86% and 12.58% on beating second-quarter earnings estimates. A 4.24% jump in Boeing Co. supported the day’s gains following reports that the beleaguered aerospace giant will resume production of its 737 Max fleet next year.