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”)
Trade optimism and easing recessionary concerns lifted the S&P 500 index out of the trading range it was confined to for the last month. Gapping markedly higher above the 50 DMA (now at 2945.19) for the first time since August 2, the index maintained the early session gains throughout the session to close at 2976, up 38.22 points and gaining 1.30% over previous session’s close.
Demand for Treasuries subsided, pushing yields higher across maturities. Rotation out of defensive stocks and into cyclicals stocks suggested a strong rebound in risk-appetite. Technology stocks benefited the most in today’s rally. Consumer Discretionary, Financials and Industrials posted strong gains. Weakness in defensive and interest-sensitive sectors, however, kept the gains capped.
THE DETAILS (The “How & Why”):
U.S. and China reportedly agreed to restart their trade talks in October. Investors cheered on hopes of de-escalating trade tensions. Stronger-than-expected private jobs data released by ADP for the month of August indicated that the private sector bounced back from a 3-year low and grew at the fastest pace in four months, fueling optimism.
The S&P 500 index opened sharply above the trading range it was strictly confined to, with Technology stocks benefiting the most from trade optimism and easing recession concerns. IPG Photonics Corp and NVIDIA Corp were the best performers within this space, jumping 7.76% and 6.51%, respectively. DXC Technology Company, Western Digital Corp, Skyworks Solutions and Micron Technology all gained more than 4% each.
Treasury yields rose sharply across the curve amid waning demand for safety. While the 2-year yield jumped the most since 2015 to settle at 1.544%, the 10-year yield climbed the most since November 2016 to settle at 1.569%. All eyes will now be on August jobs report tomorrow as investors look for confirming signs of easing recessionary concerns.
Consumer Discretionary, Financials, Industrials, Communication Services and Energy all closed higher by more than 1%. Tapestry Inc. was the strongest performer within the retail space, surging 6.65%. Tiffany & Co, Under Armour, Ralph Lauren Corp, L Brands Inc. and Nordstrom Inc. all traded higher by more than 4% apiece. All FAANG components were also sharply higher for the day, led by a 2.53% jump in Alphabet Inc.
On the other hand, rotation out of defense play stocks and into the cyclicals limited the day’s gains. Utilities, Consumer Staples and Real Estate sectors all closed lower by 1.19%, 0.73% and 0.94%, respectively alongside climbing yields. Newmont Goldcorp Corp. posted the worst declines of the session, falling 4.10% alongside sliding gold prices.