Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 05/02” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
The S&P 500 index pulled back from fresh new intraday highs to close sharply lower after the Federal Reserve Chairman Jerome Powell reiterated the central bank’s patient approach to monetary policy, further hinting that the current low level of inflation is only temporary and denied any case of interest rate cut in the near term.
Trading sideways ahead of the keenly awaited Federal Reserve’s monetary policy update, the index fell sharply in the last 30 minutes of session as investors digested Powell’s comments to close at 2923.73, down 22.10 points and losing 0.75% over previous session’s close. Energy stocks fueled the declines alongside a fall in oil prices. Except Real Estate, all the other 10 primary sectors were sharply lower for the day.
THE DETAILS (The “How & Why”):
The index struggled for direction for most part of the session as investors digested a mixed bag of economic data. The ISM manufacturing index for April and construction spending for March both came in below expected. However, the ADP employment report indicated that the private payrolls rose to 275,000 in April, a significantly higher reading compared to the expected figure of 180,000.
Treasury yields were broadly lower on mixed economic data, but spiked higher after Jerome Powell denied any rate cuts in the near term, citing that the low rate of inflation seems “transitory”. He also reiterated the central bank’s commitment to its inflation target of 2%.
Meanwhile, Apple Inc. jumped 4.91% after the iPhone maker reported better-than-expected first-quarterly earnings. Royal Caribbean Cruises Ltd, Harris Corp, Hilton Worldwide Holdings Inc., L3 Technologies Inc. and CVS Health Corp were among the top gainers of the session on beating earnings estimates, all jumping more than 5% each.
On the other hand, Molson Coors Brewing Co, Clorox Co and Garmin Ltd were the worst performers of the session, plunging 7.54%, 7.24% and 6.62% on disappointing earnings. Materials, Consumer Staples and Consumer Discretionary were the notable underperforming sectors in today’s session, down 1.84%, 1.17% and 1.13%, respectively.
Energy stocks were sold off intensely alongside a plunge in oil prices after the Energy Information Administration (EIA) reported a biggest increase in domestic crude supplies by 10 million barrels. Concho Resources Inc., Pioneer Natural Resources Co. and EOG Resources Inc. were the biggest decliner within the Energy sector, falling 5.73%, 5.09% and 4.33%, respectively.