Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
For the Outlook, Forecast, and Trading Plans published this morning, please click here
For the Results of the morning’s Trading Plans, please click here.
THE GIST (“THE WHAT”)
Extending the narrow choppy trading, the S&P 500 index closed lower for the first time in 6 days, pulling back from record highs as investors weigh better-than-feared earnings against trade tensions and geopolitical headlines. Trading slightly lower during the early session, the index pulled back sharply after President Trump rekindled trade tensions by tweeting that the U.S. – China trade deal is a ‘long way to go’.
Whipsawing within a narrow range but finding support at the closely-watched 3000 mark, the index closed off of session lows at 3004.04. Sector-wise performance was mixed with eight out of the eleven primary sectors closing lower for the day. Energy sector led the declines alongside falling oil prices amid easing tensions with Iran.
THE DETAILS (The “How & Why”):
Oil prices fell more than 2% after U.S. Secretary of State Mike Pompeo eased tensions with Iran on hinting that the U.S. will be open to negotiate with Iran about its missile program. Energy sector was the biggest drag on the index, closing lower by 1.13%, led by a 4.21% drop in Apache Corp. Devon Energy Corp, EQT Corp and Cimarex Energy Co. all fell more than 3% apiece.
Chip stocks weighed down heavily on the Technology space, falling broadly on renewed U.S. – China trade tensions. Western Digital Corp. posted the worst decline of the session of 5.77%. Micron Technology Inc., NetApp Inc. and Electronic Arts were all lower by more than 2% each.
Utilities and Health Care were other notable decliners of today’s choppy session, as investors moved out of defensive stocks in favor of safe-haven bonds as yields edged higher. Treasury yields climbed higher after retail sales numbers for the month of June rose at a better-than-expected rate of 0.4% compared to the expected gain of 0.1%. The 10-year Treasury yield hit its 4-week high to settle at 2.106%.
Meanwhile, Financials posted a lackluster performance despite rising yields after key bank earnings painted a mixed picture of the overall industry outlook. JPMorgan Chase & Co. and Goldman Sachs Group Inc. jumped 1.10% and 1.87%, respectively, on beating earnings expectations. Wells Fargo & Co. dropped 2.98% despite posting better-than-expected results after the banking giant warned of declining net interest income and rising expenses.
On the other hand, Industrials and Materials bucked the trend by posting modest gains of 0.65% and 0.19%, respectively. Transportation and airline stocks outperformed on strong earnings forecasts. J.B. Hunt Transport Services Inc. was the top gainer of the session, jumping 5.56% on posting better-than-feared results and a strong fiscal guidance. Alaska Air Group Inc., Delta Air Lines Inc. and Southwest Airlines Co. were the other strong gainers within the transportation space, all higher by 3.24%, 2.37% and 1.95%, respectively.