Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 05/16” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
Weaker-than-expected retail and industrial data out of the U.S. and China reignited fears of a global recession in the wake of escalating trade tensions, eroding confidence at the open. However, reports that the Trump administration plans to delay auto tariffs by up to 6 months lifted the S&P 500 to extend gains for the second consecutive session.
Gains, however, remained capped as investors remain cautiously optimistic about a potential trade deal amid intensifying tariff spat. With eight out of the eleven primary sectors trading higher, the index closed off of session highs at 2850.96, up 16.55 points and gaining 0.58% over previous session’s close.
THE DETAILS (The “How & Why”):
Industrial production in China for the month of April rose by 5.4%, its slowest pace of growth since May 2003. China’s retail sales in April also rose at its slowest pace in 16 years by 7.2%. Meanwhile, U.S. retail sales fell 0.2% in April, and industrial production fell 0.5%. Concerns that the year-long U.S. – China trade tensions have started slowing down the global economic growth sent the S&P 500 index lower at the open.
The index soon reversed losses, gaining a strong upward momentum alongside surging Technology and Communication Services stocks as investors brushed aside signs of slowing global economy and instead focusing on reports that the Trump administration will postpone the auto tariffs by 6 months. Ford Motor Co. and General Motors Company rose 1.17% and 0.89%, respectively. With all of the FANG components sharply higher, the Communication Services sector was the best performer of the session, up by 2.11%.
Facebook Inc., Apple Inc., Netflix Inc. and Alphabet Inc. all closed higher by 3.07%, 1.20%, 2.71% and 4.08%, respectively. Semiconductor stocks also extended gains on the back of easing trade jitter. Take-Two Interactive Software Inc. and Applied Materials Inc. were among the top gainers of the session, jumping more than 3% each.
Consumer Staples, Consumer Discretionary and Real Estate were the other notable gainers, up 0.80%, 0.78% and 0.64%, respectively. Oil prices edged up higher as investors weighed rising tensions in Middle-East against surging U.S. crude inventories, boosting Energy stocks by 0.46%.
On the other hand, dismal economic data fueled the demand for safe-haven bonds sending the 10-year Treasury yield lower. Financials were the biggest laggard within the index, down 0.48% alongside falling yields and flattening yield curve.
Retail stocks limited gains within the Consumer Discretionary following a weaker-than-expected retail sales data out of the U.S. and China. Kohl’s Corp., Nordstrom Inc. and Under Armour Inc. shed more than 1% each. While Macy’s Inc. topped the first quarter earnings estimates, the departmental store chain closed 0.46% lower after missing revenue expectations and warned of a potential impact of the ongoing tariff spat on future sales growth.
Walmart Inc. is scheduled to release its first quarterly earnings tomorrow and investors will be looking for clues for retail giant’s outlook for sales and gross margin pressure in the wake of rising tariff threats.