Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
For the Outlook, Forecast, and Trading Plans published this morning, please click here
For the Results of the morning’s Trading Plans, please click here.
THE GIST (“THE WHAT”)
The S&P 500 index closed lower for the fourth straight session, its longest losing streak in seven weeks amid conflicting signals around U.S. – China trade tensions ahead of the next round of trade talks between President Trump and Chinese President Xi Jinping at the G20 Summit later this week. Plunging defensive stocks alongside stabilizing yields overshadowed strong gains in Technology and Energy stocks.
The index opened higher following optimistic comments from U.S. Treasury Secretary Steven Mnuchin that a U.S. – China trade deal was ‘90% on the way’. Early gains, however, faded after President Trump expressed his willingness to impose additional tariffs if a trade deal is not reached. With seven out of the eleven primary sectors trading lower, the index closed near session lows at 2913.78, down slightly by 3.60 points over previous session’s close.
THE DETAILS (The “How & Why”):
As investors brace for the G20 Summit, Treasury yields bounced back from previous session’s decline after Fed Chairman Jerome Powell dashed hopes of a much-expected rate this in July. The 10-year Treasury yield edged up to settle at 2.045% on hopes that a mutually beneficial trade agreement could be reached following optimistic comments by Steve Mnuchin. Bond-proxies and defensive sectors, however, fell across the board alongside stabilizing yields.
Utilities led the day’s declines, closing sharply lower by 2.15%. Real Estate, Consumer Staples and Health Care sectors all fell by 1.96%, 1.38% and 1.25%, respectively. General Mills Inc. was the worst decliner of the session, falling 4.45% on missing revenue estimates on the back of weakening snacks business. J M Smucker Co and Hershey Co also fell more than 2% apiece.
Limiting losses, however, were solid gains in Energy and Technology sectors, both posting gains of 1.54% and 1.09%. Oil prices surged more than 2% following an unexpected drop in U.S. crude stockpiles last week. Marathon Petroleum Corp, Hess Corp and ConocoPhillips jumped 5.49%, 5.13% and 4.99%, respectively. Noble Energy Inc., Devon Energy Corp, EQT Corp and Apache Corp all posted strong gains of more than 2% apiece.
Meanwhile, Micron Technology Inc. boosted the semiconductor space, soaring 13.34% in its best day after the flash memory maker beat third-quarter earnings expectations and cited improving demand conditions. Western Digital Corp, NVIDIA Corp. and Xilinx Inc. also soared in tandem by 7.30%, 5.14% and 3.89%, respectively. Advanced Micro Devices Inc., Applied Materials Inc., Microchip Technology and Lam Research Corp were the other strong performance in the chip space, all rising more than 3% each.