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THE GIST (“THE WHAT”)
Brushing aside the heightening political and geopolitical tensions, the S&P 500 index erased Tuesday’s losses amid positive trade rhetoric. While expectations for a potential trade truce have been tempered, both disputing sides attempted to de-escalate tensions one day ahead of the 13th round of bilateral trade talks.
Technology stocks led the broad-based relief rally. Opening higher, the index maintained a slow grind higher for most part of the session. Finding resistance at 100 DMA, the index trimmed gains going into the close, closing off of session highs at 2919.40, up 26.34 points and gaining 0.91% over previous session’s close.
THE DETAILS (The “How & Why”):
Ahead of the 13th round of U.S. – China trade talks, China attempted to de-escalate tensions by offering to ratchet up their annual purchases of U.S. agricultural products in exchange for a partial trade deal. Expectations of a comprehensive pact has been tempered after China narrowed down the key issues to be discussed at the upcoming meeting, which was retaliated by the Trump administration by blacklisting 8 more Chinese technology companies from importing U.S. technologies.
Stocks rebounded partially from sharp 2-day losses on hopes that a partial trade deal could be agreed upon, while postponing a comprehensive pact involving intellectual property and state-sponsored subsidies. Technology stocks posted the biggest percentage gain of 1.45%. Semiconductors were the strongest performers within this space, recovering from their recent steep losses.
Microchip Technology, Lam Research Corp, Applied Materials Inc., Qualcomm Inc. and Skyworks Solutions Inc. jumped more than 2% apiece. Apple Inc. gained 1.17% following stock upgrade by an analyst at Raymond James, citing potential for the new 5G iPhone models that are expected to be launched next year.
Meanwhile, Netflix Inc. fell 1.18% after analysts at Macquarie upgraded its rival Roku citing significant growth of its user base predicted by 2022. All the other FAANG components traded higher for the day. Materials, Financials and Energy posted more than 1% gain each.
On the economic data front, job openings for the month of August fell for the third month in a row and hit March 2018 lows at 7.1 million, suggesting a cooling of labor market in the wake of slowing manufacturing and service activities. Treasury yields edged higher alongside surging stocks on easing of trade jitters. With yields rising, defensive stocks lagged in gains. Real Estate was the weakest performer of the session, up modestly by 0.51%.