Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 01/31” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
Buoyed by strong earnings from Boeing Co and Apple Inc., the S&P 500 jumped higher at the open. Maintaining gains ahead of the keenly awaited news conference of Fed Chairman Jerome Powell, the index took a sharp leg higher after the central bank left the benchmark interest rate unchanged for now. Investors also cheered at the change in the central bank’s dovish stance after it hinted that it might slow down on its pace of unwinding its $4 trillion asset portfolio, if the economic and financial conditions warranted.
Pulling back slightly on registering the day’s high at 2690.44, the index closed at 2681.05, up sharply by 41.05 points and gaining 1.55% over previous session’s close. Today’s Fed-led rally helped the index to break-out of the strong resistance it had been facing at 2673 and closed convincingly above it. All of the eleven primary sectors traded higher in today’s relief rally, with Technology sector in the lead.
THE DETAILS (The “How & Why”):
Apple Inc. sparked a rally in technology stocks after the tech-giant narrowly beat quarterly earnings estimates. The iPhone maker jumped 6.83% on posting disappointing revenues and a downbeat forecast, which were in-line with analysts’ expectations. Advanced Micro Devices Inc. also soared 19.95% in its best day in nearly three years after the chipmaker posted mixed quarterly performance but forecasted strong sales for the full fiscal year.
Technology sector was the best performing sector, leading the broader index higher by 3.03%. Facebook Inc. and Microsoft Corp rose 4.32% and 3.34%, respectively ahead of their earnings release. Facebook surged 12% in after-hours trading on posting record profits and a growth in its user base despite the recent privacy and data scandal. On the other hand, Microsoft Corp. slipped 4% on missing revenue estimates.
Amazon.com Inc. and Royal Caribbean Cruises Ltd lifted the broader Consumer Discretionary sector higher by 2.16%. While Amazon.com Inc. rose 4.80% ahead of its earnings release tomorrow after market close, Royal Caribbean Cruises Ltd. was the top gainer in the sector, up solidly by 7.97% on strong quarterly performance.
Boeing Co, the company worst hit by the U.S. – China trade war concerns soared 6.25% on stellar quarterly performance. The aerospace giant boosted sentiment within the Industrial space after its revenue surpassed $100 billion for the first time.
While defensive sectors traded higher in today’s relief rally, gains lagged the broader index amid rising risk appetite. Treasury yields fell sharply after the central bank reiterated its dovish stance and left the benchmark interest rates unchanged for now. The 2-year yield fell more than the longer-term 10-year Treasury yields to help steepen the yield curve and benefiting the Financials sector by 0.43%. Dollar also tumbled on the back of a dovish Fed, lifting Materials and Energy sector higher.
While the earnings season continues with Facebook Inc., Microsoft Corp., and Amazon.com Inc. all due to release their eagerly awaited results soon, investors will also be paying close attention to the renewed trade talks between the U.S. and China, hoping for some resolution to their long ongoing trade dispute.