Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 05/01” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
The S&P 500 index managed to eke out slight gains to close at fresh all-time high for the third consecutive session as strong gains in defensive sectors helped offset major declines in Communication Services sector following disappointing earnings by Alphabet Inc.
Trading lower during the early morning session, the index regained an upward momentum led by a strong rally in defensive sectors alongside falling treasury yields. With nine out of the eleven primary sectors trading higher for the day, the index managed to close in positive territory at 2945.83, up only 2.80 points over previous session’s close.
THE DETAILS (The “How & Why”):
Treasury yields settled lower ahead of the Federal Reserve’s policy announcement tomorrow afternoon. While the markets broadly expect the central bank to leave the benchmark interest rates unchanged for now, investors will be looking forward for clues about the central bank’s perception of the economy’s outlook, especially after an upbeat economic data and a benign Core Personal Consumption Expenditures (Core PCE) index.
Benefiting from falling yields, defensive sectors reversed their previous session losses. Utilities, Real Estate and Consumer Staples rose broadly by 1.67%, 1.19% and 1.23%, respectively. However, disappointing earnings reported by Google-parent Alphabet Inc. weighed down heavily on Communication Services sector. The tech-giant tumbled 7.50% in its worst day since 2012 following weaker-than-expected quarterly revenue.
Other FANG components also traded lower for the day. Apple Inc. fell 1.93% ahead of its earnings release after close but jumped nearly 5% after the iPhone maker beat earnings expectations. Semiconductor stocks, however, outperformed the index with Analog Devices Inc., Broadcom Inc. and Microchip Technology rising 2.07%, 1.38% and 1.19%, respectively.
Among other individual stocks gaining on positive earnings, Seagate Technology, General Electric Co. and Mastercard Inc. gained 7.52%, 4.52% and 2.88% on posting solid quarterly results. Pfizer Inc. and Merck & Co Inc. rose 2.58% and 2.51% following stronger-than-expected quarterly results. On the other hand, Baker Hughes A GE Co and MGM Resorts International plunged 7.51% and 6.89% on missing earnings estimates.