Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.

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THE GIST (“THE WHAT”)

Following an emotionally-charged wild overnight price action amid conflicting reports on China trade talks, the S&P500 index surged at the open on hopes of a partial trade deal and regained 50 DMA (2935.35) and 100 DMA (2929.80).

A slew of stock upgrades also improved sentiment. Struggling to maintain early gains amid cautious optimism, the index closed off of session highs at 2938.13, up 18.73 points and gaining 0.64% over previous session’s close. Energy and Financials led the advances, while defensive sectors lagged amid rising risk appetite.

THE DETAILS (The “How & Why”):

U.S. – China trade talks took center stage with the 13th round of negotiations resuming in Washington. While a comprehensive trade deal is supposedly off the table for now, expectations that both the disputing sides will show urgency to get a partial deal agreed upon in the face of dwindling business sentiment helped boost stocks.

Morning tweet by President Trump saying that he would be meeting the Chinese vice premier in White House on Friday powered the broader index to session highs. Further stoking optimism were reports that the Trump administration has issued licenses to U.S. companies to supply non-sensitive goods to Huawei Technologies.

Meanwhile, Treasury yields climbed higher alongside a sell-off in European bond market. Minutes of the ECB Governing Council’s September meeting casted doubts on the central bank’s further easing amid growing rift between its policy-making committee, sparking a major sell-off in European bond assets. The 10-year Treasury yield settled 6 basis points higher at 1.65%. Banks and other financial stocks rose broadly, lifting the Financials sector by 1.02%.

Oil prices jumped to their highest level in over a week after the OPEC left the oil demand forecast for 2020 unchanged. Energy was the best performing sector, up 1.28%, led by a more than 3% gain in Noble Energy Inc. and Cimarex Energy Co.

Other cyclical sectors including Technology, Materials and Industrials posted modest gains on easing trade jitters. Apple Inc. hit record close, jumping 1.35% following bullish ratings by several analysts amid growing optimism around its new iPhone 11 models.

A slew of stock upgrades further fueled the day’s gains. Skyworks Solutions Inc., Freeport-McMoRan Inc. and Qorvo Inc. jumped 5.18%, 4.80% and 4.79%, respectively, following stock upgrades. Bullish comments by Goldman Sachs analyst for Netflix Inc. lifted the video streaming giant by 4.84%.

Utilities was the only sector to buck the trend as Treasury yields rose across maturities. Mixed earnings coupled with disappointing forecast posted by Delta Air Lines Inc. dragged the airline lower by 1.52%. Kroger Co. was another major decliner of the session, falling 2.81% following stock downgrade by Jefferies, citing that the grocery store chain’s technology investment could turn out to be a costly mistake.