Note: Our nightly “S&P 500 Outlook,Forecast, and Trading plan for Mon 06/18”
S&P 500 TODAY
THE GIST (“THE WHAT”)
The S&P 500 index opened with a bearish sentiment as trade war concerns between the world’s two largest economic powers escalated after the Trump administration imposed tariffs on Chinese imports worth $50 billion, with China vowing to retaliate in equal measures on American imports. The index bounced back after registering the day’s low at 2761.73 in the early morning session (as our Intaday Positions Alert forecast in the morning – click here to see the real time alert), finding a strong support at 2770 as investors weighed the implication of the ongoing tit-for-tat trade spat.
Driven by falling Energy stocks, the index ended the trading day off session lows and mostly unchanged at 2779.42, down 3.07 points and losing 0.11% over the previous day’s close. The ‘Wall Street Fear Index’, CBOE VIX spiked during the morning session to register the day’s high at 13.16, but pulled back to close the session at the day’s low at 11.98.
THE DETAILS (The “How & Why”):
Energy stocks led the day’s declines, losing 2.11% as oil prices closed at their six-weeks’ lows following reports that Saudi Arabia and Russia were in talks to sign a bilateral agreement to boost their oil production. Materials and Industrials sectors were the worst impacted by the U.S. – China trade disputes, losing 0.63% and 0.25% respectively, as rising metal prices could hurt profitability of several multinationals in these sectors. Financials stocks also shed a slight 0.03% as the 10-year treasury yield edged lower, settling at 2.927%.
On the other hand, gains in defensive sectors like Utilities, Consumer Staples and Telecommunication services offset some of the day’s losses. Consumer Staples was the best performing sector in the index, up 1.32%. The broader Telecommunication sector also extended Thursday’s gains, up 1.18% on the back of rising industry consolidations that could redefine the sector dynamics.
On the economic data front, the Empire State Manufacturing survey rose 4.9 points to reach its eight-months high. While Manufacturing Production fell 0.7% in May, Capacity Utilization fell to 77.9% compared to 78.1% in April. The University of Michigan’s gauge of Consumer Sentiment for June came in at 99.3, its highest level in three months.
Throughout this week, the index has remained resilient in the wake of several geopolitical threats and policy decisions by Federal Reserve and the ECB, ending the week mostly flat, losing only a slight 0.02%. The upbeat economic data released this week provided the much needed support to the index as investors look beyond geopolitical and trade threats and focus on the ongoing economic growth story.