Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 04/18” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
Better-than-expected economic data out of China failed to boost confidence as investors remained focus on mixed earnings results posted by blue-chip companies. The S&P 500 index erased early session gains alongside a brutal sell-off in Health Care sector amid growing political risks on managed health care and insurance companies.
Whipsawing within a narrow range in the afternoon session the index closed off of session lows at 2900.45, down 6.61 points and losing 0.23% over previous session’s close. While the index continues to hover near all-time highs and above the psychologically important 2900 level, lower trading volume remains a cause of concern.
THE DETAILS (The “How & Why”):
The Chinese economy grew at a better-than-expected rate of 6.4%, compared to the expected rate of 6.3%. Significant stimulus by the Chinese government helped the country’s industrial production to increase by 8.5%, well above the expected rate of 6%. Price action within the broader index however continued to be driven by corporate performance.
Among the major companies reporting their first quarterly earnings, Netflix Inc. fell 1.31% despite beating revenue and earnings estimates. The video-streaming giant spooked investors on providing a weaker guidance and slower subscriber growth in the wake of rising competition within the streaming business.
International Business Machine (IBM) fell 2.04% on missing revenue estimates due to falling demand of mainframe computers. Autodesk Inc., Advanced Micro Devices Inc. and Salesforce Inc. were major decliners within the technology space.
Bank of New York Mellon Corp was the worst decliner of the session, tumbling 9.52% after the custody bank missed earnings expectations and signaled at increasing costs pressure in the wake of rising interest rates. Meanwhile, Morgan Stanley jumped 2.68% on posting impressive results in wealth management and fixed income trading.
Technology was the best performer of the session, closing modestly higher by 0.58% led by a 12.25% surge in Qualcomm Inc. following reports that the chip maker settled its year long dispute with Apple Inc. over patent royalties. United Continental Holdings Inc. and Kansas City Southern were the other top gainers of the session on the back of strong quarterly earnings.
Intense selling within the Health Care space continues to drag the broader index lower. The sector was broadly sold-off by 2.89% on growing concerns of the potential negative impact on drug manufacturers and health care providers from future policy changes. Anthem Inc., Cigna Corp., UnitedHealth Group Inc. were all sharply lower for the day. Alexion Pharmaceuticals Inc., DaVita Inc., Vertex Pharmaceuticals Inc., Edwards Lifesciences Corp. were among the worst performers of the session, down more than 6% each.