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For the Results of the morning’s Trading Plans, please click here.
THE GIST (“THE WHAT”)
As investors brace for the two-day testimony of Jerome Powell in front of the U.S. Congress starting tomorrow, keenly looking forward for any further cues on the Fed’s future monetary policy after a surprisingly strong jobs report, the S&P 500 managed to eke out slight gains on the back of a late session rally.
Mirroring an overnight decline in futures market, the index gapped down at the open but erased early session losses buoyed by strength in big-tech stocks. Flirting with the flat line for most part of the afternoon session, a late session rally lifted the index into a positive territory to close near session highs at 2979.63, up slightly by 3.68 points over previous day’s close.
Falling copper prices and strengthening U.S. dollar dragged the Materials sector to be the worst performer for the third session in a row. However, modest gains in FAANG components and Real Estate stocks helped offset these declines.
THE DETAILS (The “How & Why”):
Expectations of a quarter-point rate cut by the Fed this month end had lifted the S&P 500 index to register record-highs last week. The index, however, retreated from its all-time highs after a stronger-than-expected jobs report dented the hopes of quantitative monetary easing. Investors will be closely reading into the Fed Chairman Jerome Powell’s comments for cues on whether the Fed thinks the economy is weakening enough to need stimulus or is it strong enough to hold off a rate cut.
Materials sector was the biggest drag on the index for the third session in a row, down 1.01%, weighed down by tumbling copper prices and strengthening U.S. dollar. Freeport McMoRan Inc. led the sector declines by posting a 3.12% loss. Consumer Staples and Industrials were the other laggards of the session, down 0.58% and 0.21%, respectively. The 10-year Treasury yield settled slightly higher at 2.069% ahead of the Powell testimony. Interest-sensitive defensive sectors lagged in gains alongside rising yields.
Reports that President Trump might unveil a plan to overhaul the kidney disease treatment market by announcing initiatives to encourage kidney treatments at home sent the dialysis providing stocks tumbling. DaVita Inc. was the worst decliner of the session, down 5.33%.
Meanwhile, Advanced Micro Devices Inc. led the chip stocks higher, jumping 3.46% following stock upgrade by an analyst, citing an upside potential of its new third-generation Ryzen desktop processors and Radeon graphics cards. Twitter Inc., Western Digital Corp. and Micron Technology Inc. were the other strong performers within the tech space, gaining 3.29%, 3.23% and 2.33%, respectively.
All of the FAANG components traded higher for the day, led by a 1.84% jump in Amazon Inc. Real Estate, Consumer Discretionary and Financials also posted modest gains.