Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 08/23” will be posted around 8:30am EDT, Thursday.
THE GIST (“THE WHAT”)
The U.S. stock market has registered its longest bullish run on record. The S&P 500 index however ended its four days streak of gains that had lifted the index higher to register new all-time highs for the first time since January 26, 2018 as political drama surrounding President Trump weighed down on investor sentiment. Falling lower at the open amid the overnight political turmoil, the index gained an upward momentum, registering the day’s high at 2867.54 as rising oil prices lifted Energy stocks for the fifth straight session.
The index held on to the slight gains ahead of the highly awaited FOMC minutes release in the afternoon. Reaction to the FOMC minutes were however muted after the Federal Reserve reaffirmed its hawkish stance. Swinging between small gains and losses in a tight range, the index closed the session mostly unchanged at 2861.82 (Just about 2 points above the level indicated by our models for a bullish bias! Click here to read the full text), down 1.14 points and losing a slight 0.04% over previous day’s close. Seven out of the eleven primary sectors ended the session lower.
THE DETAILS (The “How & Why”):
Telecommunications sector led the day’s declines, shedding 2.02%. CenturyLink Inc. was the worst performer in today’s session, losing 6.51% and dragging other telecom companies lower after analysts at Moffatt Nathanson downgraded the stock from neutral to sell citing a need for higher investment in 5G network upgrades.
Airline companies reversed their recent gains as oil prices edged higher. American Airlines Group Inc. and Alaska Air Group Inc. shed 2.83% and 2.54% respectively, leading the broader Industrials sector lower by 0.93%. J.M. Smucker Company extended its last session losses by 2.59% as investors continued to digest its disappointing results, weighing down on the Consumer Staples sector to end the session lower by 0.63%.
Public Storage fell 4.45%, dragging the broader Real Estate sector lower by 0.65% after Goldman Sachs downgraded the self-storage company citing the slowing same-store growth. Utilities and Materials sectors were the other notable decliners, down 0.78% and 0.45% respectively.
The 10-year Treasury yield settled at a 3-month low following the FOMC minutes release, sending Financials stocks lower by 0.26%. The central bank reiterated its hawkish stance of additional rate hikes if the economy keeps strengthening. However, the central bank also hinted that it might slow down on the pace of rate hikes if warranted by the ongoing trade uncertainties.
On the other hand, Energy sector limited the day’s losses, gaining a decent 1.20% alongside a rise in oil prices. Oil prices climbed higher for the fifth straight session following an EIA (Energy Information Administration) report that indicated a drop in U.S. crude oil inventories.
Solid second quarter results reported by Lowe’s Cos and Target Corp. boosted the Consumer Discretionary sector higher by 0.12%. Technology and Health Care were the other sectors supporting the day’s gains, up 0.48% and 0.11% respectively.