Note: Our nightly “S&P 500 Outlook,Forecast, and Trading plan for Tuesday, 07/03” – please check back later.
S&P 500 TODAY – MONDAY 07/02
THE GIST (“THE WHAT”)
The S&P 500 index opened the first trading day of the third quarter on a bearish note as trade jitters kept the global equity markets under pressure overnight. Energy stocks led the day’s decline in the early session as oil prices drifted lower, but the broader index held on to the psychologically important 2700 level.
In a sharp rebound during the afternoon session, backed by an upbeat Manufacturing data, with Technology stocks in the lead, the index bounced off its 50 DMA (now at 2718.60). Entering into a positive territory, albeit on a tepid volume on this holiday shortened week, the index closed near session highs at 2726.71, up 8.34% and gaining 0.31% over the previous session close.
THE DETAILS (The “How & Why”):
As a sign of an imminent trade war, Canada’s retaliatory tariffs on American goods took effect on Sunday. Meanwhile, fresh tariffs on Chinese goods valuing $34 billion by the U.S. is scheduled to go into effect on Friday with China threatening to impose retaliatory tariffs on American goods with equal measure. Further adding to the trade war concerns, the Trump administration announced its plan to abandon the World Trade Organization rules that could give the current administration a free hand at raising tariffs at will.
In a change of trend, Energy sector led the day’s decline, losing 1.55% after being the best gainer in the index last week. An overnight tweet by President Trump that Saudi Arabia had agreed to increase their oil production, sent oil prices plummeting at the session opening. The broader index reversed losses as Technology stocks rallied in the afternoon session led by Micron Technology Inc. and Twitter Inc., gaining 0.99%, overcoming weakness in the Energy sector.
With trade jitters roiling the global markets, trade sensitive Consumer Staples and Materials stocks fell 0.53% and 0.46%, respectively as rising costs continue to hurt corporate margins of several multinational companies in these sectors. Real Estate also shed 0.50%.
Financials stocks extended their last week’s optimism post their buoyant stress test result, coupled by buybacks and dividend hike announcements by several banks, gaining 0.66%. Consumer Discretionary, Health Care, Industrials and
Telecommunication sectors also reversed trend with a change in investor sentiments in the afternoon session following an upbeat manufacturing data. The Manufacturing Index released by the Institute for Supply Management (ISM) rose to 60.2% in June compared to 58.7% in May, indicating an expanding economy in the current economic cycle. On the other hand, new orders came in lower at 63.5% for the month of June, compared to 63.7% for May. The employment gauge also came lower at 56%, down 0.3% compared to May.