Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
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THE GIST (“THE WHAT”)
Taking a breather from an intense 6-day losing streak, the S&P 500 index clawed back some of Monday’s sharp losses after China reassured investors by setting the reference rate for yuan at a better-than-expected level. Investors bought back beaten-down China-exposed stocks that were being brutally sold off during the worst day of 2019.
A strong afternoon rally lifted the index to close near session highs at 2881.77, up 37.03 points and gaining 1.30% over previous session’s close. Ten out of the eleven primary sectors posted strong gains with Technology stocks leading the advances. Energy was the only sector to not participate in today’s relief rally as oil prices slid into the bear market territory on concerns of slowing global economic growth in the wake of worsening U.S. – China trade tensions.
THE DETAILS (The “How & Why”):
Treasury yields stabilized from their steepest 3-day decline since financial crisis after panicked investors flocked to safe haven assets on concerns that China will use its currency as a weapon in the protracted U.S. – China trade war. In an attempt to reassure investors, China set its reference rate at 6.9683 while announcing its plan to issue 30 billion yuan worth of central bank bills that could push the yuan higher against the dollar. The 10-year Treasury yield settled mostly flat at 1.716%.
Technology stocks led today’s relief rally after bearing the brunt of investor anxiety in Monday’s rout. Investors stepped in to buy the beaten-down stocks at-the-dip, lifting the broader sector higher by 1.61%. Take-Two Interactive Software Inc. and KLA Corp were the top gainers within this space, jumping more than 7% each on posting a solid quarterly performance.
All FAANG components and semiconductor stocks staged a rebound from Monday’s ugly sell-off. Intuit Inc., Qorvo Inc. and Skyworks Solutions Inc. gained back more than 2% apiece. Financials, Industrials, Consumer Discretionary, Communication Services all stabilized, gaining back more than 1% each.
Energy stocks, however, capped the day’s strong gains, closing slightly lower by 0.06%. Oil prices slipped into the bear market territory, falling to their 7-month lows amid uncertainty around U.S. – China trade tensions that could hurt global economic growth, thus impacting the demand for oil. Concho Resources Inc. and EQT Corp were the sharpest decliners within the Energy sector, tumbling 5.11% and 4.06%, respectively. Occidental Petroleum Corp, Marathon Oil Corp and Cimarex Energy Co were the other major decliners within this space, extending their declines by 3.72%, 2.72% and 2.16%, respectively.
Cardinal Health Inc., AmerisourceBergen Corp. and McKesson Corp. added to the day’s sharp declines, plunging 5.77%, 5.17% and 3.91% after the three major drug distributers proposed a payment of $10 billion to settle claims that they fueled the opioid addiction and overuse by aggressively marketing the medication in the U.S.