THE GIST (“THE WHAT”)
The S&P 500 index opened the holiday-shortened week on a bearish note ahead of Fed Chair Jerome Powell’s testimony tomorrow, giving back some of the last week’s sustained gains that pushed the index to a 14-month high. The index, however, clawed back most of the early session’s losses to close modestly lower at 4388.72, down 20.88 points (-0.47%).
Note: Our daily “S&P 500 Trading plan” will be posted around 9:30/10:00am EDT, every trading day.
Trading Plans for FRI. 06/16: Bull Consolidation Ahead of the Holiday-shortened Next Week
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THE DETAILS (The “How & Why”):
The index traded lower at the open after China’s central bank cut its lending rates for the first time in 10-months, albeit less than expected. An unexpected jump in the U.S. housing data that could turn the Fed hawkish further stoked the risk-off sentiment. Homebuilder stocks rallied following reports that the U.S. housing starts for the month of May surged by a sharp 21.7% month-over-month to a 13-month high. Building permits, a proxy for future construction also rose by 5.2% month-over-month to a 7-month high.
Powell’s testimony tomorrow could be a potential market mover as investors will be closely looking for cues into the Fed’s next policy path in the wake of sticky inflation and a resilient economy. The Fed took a breather from its aggressive rate hikes in order to assess the effects of its prior policy actions. But rate hikes could resume if inflation continues to remain high. The 10-year treasury yield fell by 3.6 basis points to settle at 3.725%.
Energy was the worst performing sector of the session, falling 2.29% alongside sliding oil prices amid signs of Chinese slow down. Haliburton, Devon Energy and Phillips 66 all closed lower by more than 3%. Solaredge Technologies Inc (-7.71%) and Enphase Energy Inc were the worst decliners of the session. Warner Bros Discovery slipped 4% after weekend box office receipts for the opening of ‘The Flash’ came in below expectations.
Limiting the day’s losses, Generac Holding surged 7.91% following reports that the summer blackout season could be bullish for the generator manufacturer. Tesla also jumped 5.34% after its rival Rivian Automotive agreed to adopt Tesla’s charging standard. PayPal Holdings was another strong performer of the session, closing higher by 3.70% after KKR& Co agreed to buy 40 billion euros of its pay-later loans.