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 last published Results of the Morning Trading Plans, please click here.
THE GIST (“THE WHAT”)
Brushing aside concerns of economic slowdown and simmering trade tensions for now, investors cheered Hong Kong leader Carrie Lam’s official announcement of withdrawing the controversial extradition bill that had sparked months of violent protest that threatened to disrupt global economy. Expectations of additional stimulus out of China further lifted sentiments that were soured over the weekend after new tariffs on Chinese goods went into effect.
Rebounding from previous session’s slump, the S&P 500 index gapped up at the open and maintained a steady stream of gains throughout the session to close near session highs at 2937.78, up 31.51 points and gaining 1.08% over previous session’s close. Technology stocks staged a strong rebound to lead the index higher. While easing Hong Kong tensions improved sentiment, price action remained range bound and failed to breach the 2840 key resistance level.
THE DETAILS (The “How & Why”):
Treasury yields edged up during the early session amid easing of Hong Kong tensions. But dovish comments by several Fed officials ahead of the keenly awaited Sept. 17-18 meeting send the yields lower. The 10-year Treasury yield, however, settled slightly above the 2-year Treasury yield, un-inverting the closely-watched yield spread and boosting banking stocks.
Reports that People’s Bank of China might cut its reserve requirement ratio for Chinese banks stoked expectations that the additional stimulus will help avert global recession. Meanwhile, as the Brexit drama unfolds, growing hopes that the U.K. could avoid a disorderly exit from the European Union also improved risk-appetite.
Technology stocks bounced back strongly from Tuesday’s sharp losses, closing 1.71% higher. IPG Photonics Corp was the best performer within this space, gaining 6.34%. Seagate Technologies, Micron Technology, Lam Research Corp and Intel Corp all climbed more than 4% each.
Communication Services, Energy, Industrials and Materials added to strong gains, all closing higher by more than 1%. With improving risk-appetite, defensive stocks lagged the broader index in gains. Utilities and Health Care managed to hold on to slight gains in today’s broad-based relief rally. Tyson Foods Inc. weighed down heavily on Consumer Staples space, tumbling 7.75% on slashing its EPS guidance for the fiscal year.