Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 03/13” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
A softer-than-expected Consumer Price Index signaled at a muted inflation and reaffirmed the Federal Reserve’s decision to be patient with rate hikes, sending Treasury yields lower and benefiting riskier equity assets. The S&P 500 index extended gains to close higher for the second straight session with Technology and Health Care sectors leading the advances.
The index was however unable to pierce through the major resistance level of 2800, as gains remained capped due to weakness in airlines and transportation stocks that were weighed down heavily by a slump in Boeing Inc. Trading mostly higher but whipsawing within a thin range, the index closed off of session highs at 2791.52, up 8.22 points and gaining 0.30% over previous session’s close.
THE DETAILS (The “How & Why”):
The U.S. Consumer Price Index rose 0.2% in February, the first increase in three months albeit at a lower-than-expected pace. A softer inflation data underscored the Federal Reserve’s dovish stance of being patient with the rate hikes. Treasury yields fell across the board with the 10-year Treasury yield hitting its three-month low near 2.60%. Defensive sectors Health Care, Utilities and Real Estate benefited from falling yields, closing modestly higher by 0.67%, 0.62% and 0.47%, respectively.
Building on previous session’s strong gains, Technology and Communication Services sectors outperformed the index. Apple Inc. and Alphabet Inc. rose more than 1% each. F5 Networks Inc. and Hewlett Packard Enterprise Co offset some of these gains. While F5 Networks Inc. tumbled 7.67% on announcing a $670 million acquisition of private software firm NGINX, Hewlett Packard fell 3.65% on stock downgrade by UBS.
Energy, Consumer Discretionary and Materials were the other notable gainers of the session, closing higher by 0.58%, 0.23% and 0.33%, respectively. Oil prices settled higher for the second straight day on reports of tightening global crude supply.
On the other hand, Industrials sector was the only notable decliner of the session, down 0.91%, primarily weighed down heavily by Boeing Inc. The aircraft maker extended its decline for the second session, shedding another 6.15% amid concerns over the safety of its most popular airplanes.
Following a second deadly crash in just over 6 months several countries grounded the Boeing 737 Max 8 planes, pending further investigations. American Airline Group Inc., Alaska Air Group Inc. and Southwest Airlines Co, all fell more than 2% each after Consumer Reports called for a global ban on Boeing 737 Max 8 planes.
Separately, market mostly shrugged off the latest landmark defeat of Prime Minister Theresa May’s Brexit deal by the U.K. Parliament. Lawmakers are expected to decide whether the U.K. should leave the EU without a deal or extend the March 29 deadline for leaving the EU.