Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 01/17” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
Driven higher by strong quarterly earnings reported by Bank of America and Goldman Sachs, the S&P 500 index extended gains for the second straight session. Disappointing earnings reported by several companies across sectors, however, kept the gains capped.
While strong earnings lifted the index at the open, price action was confined withing a narrow range as investors weighed several disappointing earnings against solid bank earnings. The index, however, was pulled back in the last few hours of the session following reports of an investigation into China’s Huawei Technologies Co. for allegedly stealing trade secrets from U.S. companies, reviving trade war jitters.
Closing above the psychologically important 2600 level for the second day in a row, the index fell under 3 points shy of retaking the resistance of 50 DMA, pulling back on registering the day’s high at 2625.76. Six out of the eleven primary sectors supported gains, with Financials leading the advances in today’s choppy session to close near day’s lows at 2616.10, up 5.80 points and gaining 0.22% over previous session’s close.
THE DETAILS (The “How & Why”):
Financials sector rallied 2.20% to lead the index higher following stellar quarterly earnings reported by Bank of America Corp, Goldman Sachs Group Inc. and Charles Schwab Corp. Despite the year-end market turbulence, Bank of America and Goldman Sachs were able to top earnings estimates on the back of growth in deposits and loans.
Healthy outlook of consumer banking provided by these banks helped lift sentiment within the sector. While Goldman Sachs jumped 9.54% in its best day since 2009, Bank of America rose 7.16%. Charles Schwab Corp, Comerica Inc. and Morgan Stanley were the other strong performers within the sector, up 5.54%, 5.52% and 3.75%, respectively.
Among the other notable gainers in today’s choppy session were Real Estate, Materials and Utilities all closing higher by 0.55%, 0.41% and 0.27%, respectively. Semiconductor stocks gave back some of previous session’s solid gains, led by a 3.19% decline in Advanced Micro Devices Inc. to weigh down on the Technology sector.
While Technology sector closed the session relatively unchanged, Communication Services was a notable decliners, down 0.40%. Fiserv Inc. was the worst performer within the tech space, falling 3.29% after the financial technology provider announced a $22 billion buy-out deal with payment processor First Data. Netflix Inc. also pulled back from previous session’s strong gains, falling 0.92% ahead of earnings release tomorrow after market close.
Leading the declines was Consumer Staples sector, down 0.54%. Ford Motor Company was the worst performer of the session, tumbling 6.22% following a disappointing preliminary 2018 earnings. Nordstrom Inc. further fueled the declines within the Consumer Discretionary space, falling 4.76% on missing holiday sales estimates. Macy’s Inc. also shed 2.00% after the retailer was downgraded by Bank of America, citing lackluster holiday sales.
Health Care and Energy sectors were the other decliners of the session, down 0.15% each. Oil prices edged lower after a record increase in U.S. crude production. The EIA (Energy Information Administration) reported an unprecedented 12 million b/d increase in U.S.
crude production.