Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Friday, 10/26” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
Taking a breather from a 6-day riot, the S&P 500 index rebounded solidly to erase some of previous session’s deep losses following impressive quarterly results by Microsoft, Twitter, Ford and American Airlines Group.
Opening higher, the index marched higher with a steady momentum. Gains, however, faded in the last hour of the session, pulling back from the day’s high of 2722.70. With ten out of the eleven primary sectors higher for the day, the index closed off of session highs at 2705.57, up 49.47 points and gaining 1.86% over previous session’s close.
THE DETAILS (The “How & Why”):
The most beaten down Technology and Consumer Discretionary services bounced back from last session’s brutal sell-off to be the best performers of today’s session, up 3.32% and 3.41% respectively. Twitter Inc. and Xilinx Inc. rallied 15.47% and 15.01% to lead the broader index higher on the back of better-than-expected third quarterly earnings. Investors ignored a sharp decline in monthly user numbers of Twitter Inc., instead cheering the social-media giant’s strong revenue and profits.
Take-Two Interactive Software Inc. hit its all-time highs, soaring 8.77% following positive reviews of its long-anticipated “Red Dead Redemption 2”. Fueling optimism within the sector, Microsoft Corp. rose 5.84% on beating earnings estimates on the back of a solid growth in its cloud computing services. While the sector was broadly higher, Advanced Micro Devices was a sharp decliner, tumbling 15.45% after the chipmaker missed revenue estimates and warned of its slowing graphics business.
Leading the Consumer Discretionary sector higher was Ford Motor Co., sharply up by 9.90% in its best day since 2012 despite a 37% y-o-y decline in net earnings, albeit better-than-expected. Netflix Inc. rebounded from its previous session’s sharp drop, up 3.66%. Amazon.com Inc. led the FAANG stocks higher, jumping 7.09% ahead of earnings release, but dropped close to 9% in after-hours trading on weaker guidance, despite beating third quarter estimates.
Communication Services, Financials and Materials were the other strong performers in today’s relief rally, up 2.67%, 1.64% and 1.38% respectively. American Airlines Group Inc. soared 6.69% on topping estimates, leading the broader Industrials sector higher by 0.74%. However, limiting the gains within this space was a sharp decline in Equifax Inc. and Southwest Airlines Company on disappointing guidance, down 14.78% and 8.57%.
While the Health Care sector closed the session modestly higher by 1.24%, Align Technology Inc. limited gains within this space, plunging 20.20% to a six-month low following a tepid outlook and a stock downgrade. The only sector to end the session lower amid today’s broad-based rally was Utilities, down broadly by 1.50%. This defensive sector gave up some of previous session’s solid gains on the back of profit-taking in today’s risk-on mood.