Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Wed, 08/01” will be posted Tue, 07/31 night – please check back around 10:30pm/11pm EDT.
THE GIST (“THE WHAT”)
The S&P 500 rebounded from a three-day streak of a Technology-led slump, supported by a rally in the Industrials as trade war concerns eased. Opening modestly higher following a better-than-expected Consumer Sentiment number, the index registered the day’s high at 2824.46 (half point away from the upper bound of the choppy trading range indicated by our models. Click here to read the full report/validate this claim). Trading within a very narrow range thereafter and finding a very strong support at the 2810 level, the index closed at 2816.29, up 13.69 points and gaining a decent 0.49% over previous session’s close.
Withstanding a major sell-off in FANG stocks, the index ended the month with a 3.80% gain as investors maintained their focus on strong corporate earnings, putting behind fears of the risk of a full-blown trade war as well as other geopolitical tensions on the back burner for now. All primary sectors ended the month higher.
THE DETAILS (The “How & Why”):
After a widespread sell-off, the broader Technology sector rebounded as FANG stocks recovered from a sharp three days decline following a series of disappointing results by Facebook Inc., Twitter Inc. and Netflix Inc. The sector gained 0.30% led by a 10.46% and 9.68% rise in semiconductor companies KLA Tencor Corp. and Harris Corp. on beating earnings estimates. Offsetting these strong gains however, was a 5.61% fall in Advanced Micro Devices Inc. The sector was up 2.04% for the month.
Leading the index higher were Industrial stocks that rallied on the back of easing trade tensions following news that the U.S. and China are seeking to restart negotiating talks to avoid a full-blown trade war. All components within the sector gained in today’s relief rally. Closing higher by 2.12% led by a 9.32% rise in Xylem Inc. and a 4.77% rise in Deere & Co., the sector was the best performer for the month, up 7.25%.
Financial stocks shed 0.68% as investors keenly await the FOMC minutes to be released tomorrow. The 10-year Treasury yields closed slightly lower by 1.3 basis points to settle at 2.96% following a reassurance by the Bank of Japan that it will continue to maintain loose monetary policy for an extended period of time. Falling yields benefited the broader Real Estate sector by 1.89% to be the second best performing sector in today’s session.
Health Care, Utilities and Materials were the other notable gainers, up 1.01%, 1.06% and 0.90% respectively. Illumina Inc. was the top gainer, soaring 12.14% on topping second quarter estimates. Health Care was the second best gainer of the month, up 6.48%. On the other hand, Telecommunications and Energy sectors reversed previous session’s gains, losing 0.77% and 0.32% respectively.