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THE GIST (“THE WHAT”)
Political and trade headlines continued to drive price action. The S&P 500 index snapped a three-day losing streak as trade optimism overshadowed impeachment worries. The index erased early session losses after President Trump reignited hopes of a trade deal with China that could come ‘sooner than expected’. Gains, however, remained capped amid the ongoing political drama in the White House.
With improving risk appetite, investors bought back the beaten-down cyclical stocks. Technology and Consumer Discretionary stocks outperformed to lead the broader index higher. A slow grind higher throughout the afternoon session lifted the index to close near session highs at 2984.87, up 18.27 points and gaining 0.62% over previous session’s close.
THE DETAILS (The “How & Why”):
Markets brushed aside impeachment concerns, buying back the beaten-down cyclical stocks after President Trump hinted at the UN General Assembly that a U.S. – China trade deal could happen sooner than expected. Risk appetite also improved as markets digested the released transcript of Trump’s controversial call with the Ukrainian president that appeared less harmful than expected.
The 10-year Treasury yield jumped 10 points on the back of trade optimism, settling at 1.736%. Financials stocks gained as yields rebounded from their 2-week lows. Stellar new U.S. home sales data that suggested that new home sale rose 7.1% in August also helped boost confidence.
Technology and Communication Services clawed back some of their recent losses, posting the biggest percentage gains of the session, up 1.24% and 1.12%, respectively. Consumer Discretionary, Industrials and Materials also posted modest gains.
Netflix Inc. staged a strong rebound and led the FAANG components higher, jumping 3.99% for the first time in six sessions. Alphabet Inc. climbed 2.27% after RBC Capital analyst Mark Mahaney cited the potential of generating strong advertisement revenue by monetizing Google Maps. NVIDIA Corp and IPG Photonics Corp gained more than 3% each.
Nike Inc. led retailers higher, jumping 4.16% to hit record highs on topping earnings expectations. Cintas Corp was another strong performer, gaining 5.74% on the back of earnings beat.
Defensive stocks lagged in performance as investors favored cyclical stocks alongside rising yields. Health Care was the biggest drag on the index, closing 0.48% lower. Real Estate and Utilities closed the session mostly unchanged.
Meanwhile, Philip Morris International Inc. helped offset weakness in Consumer Staples space. The cigarette and tobacco manufacturing giant jumped 5.20% after it called off its planned merger with Altria Inc.