Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Friday, 08/03” will be posted by 7:30am/8:00am EDT, Friday.
THE GIST (“THE WHAT”)
With the U.S. – China trade spat back to the fore, the S&P 500 index opened the session significantly lower. Opening below the 20 DMA (now at 2806.53) and registering the day’s low at 2796.34, the index however reversed losses as Apple Inc. reached the $1 trillion market valuation milestone, pulling the broader Technology sector higher for the second day in a row. Further boosting momentum were upbeat corporate performances as earnings took center stage putting trade tensions aside.
Finding a strong support and resistance at 2800 – 2830 level, the index has been range bound this week as investors continue to weigh escalating trade tensions against strong corporate performances in the ongoing second quarterly earnings season.
Led by Technology sector for the second day in a row, the index closed with a modest 0.49% gain over previous session’s close at 2827.22 (the session’s choppy price action stayed right around the broad trading range mentioned in our outlook! While the day’s low bounced off one point shy of the lower bound, protecting potential trades from getting into a bear trap, the session closed just under 3 points above the level indicating a bullish bias. Click here to read the full text), up 13.86 points. Sectorial performances however remained mixed with seven out of the eleven primary sectors ending the session higher.
THE DETAILS (The “How & Why”):
Escalating trade tensions between the U.S. and China dominated the index at the open, dragging it below the 20 DMA for the first time since July 6. In a bid to increase pressure on China, the Trump administration confirmed its plan to increase tariffs on $200 billion worth of Chinese goods from the previously proposed 10% to 25%, hurting the trade sensitive Industrials and Materials sectors.
Technology led the index higher in afternoon session buoyed by optimism as Apple Inc. made history by becoming the first publicly listed U.S. company to reach a $1 trillion market valuation milestone. The tech giant now makes up to more than 4% of S&P 500 index composition. The broader sector gained 1.37% led by a 6.51% gain in Global Payments Inc. on topping earnings expectations and on announcing its plan to acquire a software provider, AdvancedMD.
Consumer Staples sector also helped lift the index, gaining 1.08%. Clorox Co. w
as the top gainer within the sector, rising 6.17% on reporting better-than-expected results. Consumer Discretionary and Utilities sectors were other notable gainers, up 0.63% and 0.53% respectively. PerkinElmer Inc. and Regeneron Pharmaceuticals Inc. gained 8.32% and 7%, lifting the broader Health Care sector by 0.29%.
as the top gainer within the sector, rising 6.17% on reporting better-than-expected results. Consumer Discretionary and Utilities sectors were other notable gainers, up 0.63% and 0.53% respectively. PerkinElmer Inc. and Regeneron Pharmaceuticals Inc. gained 8.32% and 7%, lifting the broader Health Care sector by 0.29%.
Financial stocks closed the session mostly unchanged, up a slight 0.04%. The 10-year Treasury yield settled lower at 2.986%, inching down by 2 basis points after crossing the psychologically important 3% mark in last session after the Federal Reserve reaffirmed its plan of two additional rate hikes this year.
Leading the day’s declines were trade sensitive Materials and Industrial stocks, losing 0.72% and 0.17%, weighed down by escalating trade war concerns. Limiting losses was a solid 12.17% gain in CF Industries Holdings Inc. on topping earnings estimates. Real Estate and Energy were the other notable decliners, down 0.53% and 0.52% respectively.