Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 10/31” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
Strong earnings and a relief on trade war front helped the S&P 500 to recoup some of the previous session’s steep losses. Easing trade tensions, President Trump hinted his willingness to renegotiate a trade deal with China, albeit with a warning that tariffs will be levied on the remaining Chinese imports if a favorable deal does not go through. The most beaten down stocks in this brutal month were the best performers in today’s relief rally.
Swinging within a wide range, the index gave up most of the day’s gains mid-day but gained a sharp bullish momentum in the last two hours of the session to close near day’s high at 2682.63, up 41.38 points and gaining 1.57% over previous session’s close. All of the eleven primary sectors benefited in today’ relief rally. The index registered a sixth up day this month, making it the worst month since February 2009.
THE DETAILS (The “How & Why”):
Communication Services, Industrials and Materials were amongst the worst performing sectors in this month’s brutal sell-off, primarily driven by concerns that trade tensions between the U.S. and China have started cutting into profit margins of multinationals with large exposure to Chinese markets in these sectors. With easing of trade jitters in today’s session, these sectors gained broadly in today’s relief rally.
Vulcan Materials Co. led the Materials sector, soaring 17.49% on beating third quarter earnings estimates and reporting a solid 65% increase in net earnings. While Industrials sector rebounded from previous session’s losses, rising 2.01%, the struggling industrial giant General Electric Company limited these gains, plummeting 8.78% following disappointing earnings and slashing its quarterly dividends.
Energy stocks rose broadly in today’s rally after leading the index lower in previous session, up 2.30% despite oil prices dipping on concerns of rising supply and falling global demand. Consumer Staples and Real Estate were other strong performers, up 1.97% and 1.67% respectively. Retail and department chain stores rose ahead of the shopping season. Walmart Inc. and Walgreens Boots Alliance Inc. gained 2.63% and 2.58% intraday. Financial stocks also benefited 1.60% alongside a rise in yields. The 10-year Treasury yields edged up to 3.12% from 3.08%.
Impressive quarterly results and full-year guidance by Under Armour Inc. boosted confidence within the Consumer Discretionary sector. The performance footwear and athletic apparel specialist surged 27.71% to be the top gainer of the session, leading the broader sector higher by 1.23%.
Technology stocks also breathed a sigh of relief, gaining some of the lost ground by 1.16%. Akamai Technologies Inc. and IPG Photonics Corporation climbed 16.92% and 7.97% on beating earnings estimates. Semiconductors rose broadly on easing of trade tensions. Take-Two Interactive Software Inc. and NVIDIA Corp. were the other strong performers within the sector, up 11% and 9.36% respectively.
Facebook Inc. rose 2.91% ahead of its keenly awaited quarterly results after-close. The social-media giant oscillated between gains and losses in after-hours trading on beating earnings estimates but falling short on revenue. Limiting some of these decent gains was a sharp decline in Flir Systems Inc. The manufacturer of sensing products tumbled 12.92% on disappointing quarterly results. IBM also extended its slide, falling 3.54% after announcing its acquisition of Red Hat Inc. for $34 billion.