Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 10/17” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
Strong corporate earnings were back in focus, helping the S&P 500 index to regain some of its lost ground in its best day since March 26, 2018. U.S. industrial production rose at a better-than-expected rate of 0.3% in September, further lifting confidence at the open. Staging a strong rebound, all primary sectors gained solidly in today’s broad-based rally with Technology sector in the lead.
Opening with optimism following upbeat quarterly results by heavyweights Goldman Sachs, Morgan Stanley and United Health Group, the index maintained a steady bullish momentum as investors shrugged off concerns of rising yields in favor of strong corporate results to close the session at 2809.92, up 59.13 points and gaining 2.15% over previous session’s close.
Technically speaking, while the index regained the psychologically important 2800 level and the key technical support level of 200 DMA (now at 2767.17), after trading below it for the last 3 sessions, the 20 DMA is now just 1.34 points away from converging with the 50 DMA.
THE DETAILS (The “How & Why”):
Technology was the best performing sector, rising broadly by 3.02% after being beaten down over the past few sessions on concerns of high-valuations in rising rate environment and lingering trade tensions. Gains within the sector were also fueled by strong results by Adobe Inc. The software company was the top gainer of the session, soaring 9.52% on reporting better-than-expected third quarter revenue and earnings, coupled with a strong future guidance.
Advanced Micro Devices Inc. led the chip stocks rebound, rising strongly by 7.31%. Except CA Inc., that shed a slight 0.05%, all the components within the tech sector traded higher in today’s relief rally. Financials sector also received a modest 1.60% lift following better-than-expected results by Morgan Stanley and Goldman Sachs.
Health Care sector was the next best performer, gaining 2.90%, fueled by upbeat quarterly results by UnitedHealth Group Inc. and Johnson and Johnson Company. Regeneron Pharmaceuticals Inc. was the best performer within the sector, rising 5.55% on news that its new drug, Dupixent showed promising results in treating nasal polyps.
Communication Services and Consumer Discretionary sectors also gained some of their lost ground, 2.34% and 2.22% as investors shrugged fears of rising interest rates in today’s broad-based rally.
Dollar Tree Inc. spiked during the mid-day session, closing the session up by 6.38% on news that billionaire investor Carl Icahn is accumulating a significant stake in the discount retailer. Netflix Inc. further boosted gains in Consumer Discretionary sector, gaining 3.98% ahead of its earnings release. The media company soared 15% after session’s close on beating earnings estimates and reporting a 36% year-on-year increase in its streaming revenue.
Defensive stocks also extended their gains. Real Estate, Utilities and Consumer Staples were all up 1.91%, 1.16% and 1.05% respectively. On the economic data front, U.S. industrial production rose at better-than-expected rate of 0.3% in September. The number of job openings hit all-time high of 7.1 million in the month of August.