US Stocks Extend Gains as Tech and Healthcare Lead the Charge
A wider read of yesterday's session — sector rotation, pre-market action, watchlist scan, and what to watch into the US open at 21:30 HKT.
TL;DR
The US market extended its gains from the previous session, with the S&P 500 rising +0.37% to 7,473.47 and the Nasdaq 100 increasing +0.42% to 29,481.64. The rally was led by the tech and healthcare sectors, with XLK and XLV gaining +1.00% and +1.17%, respectively. Below the surface, the market's breadth was relatively strong, with the Russell 2000 outperforming the S&P 500 by +0.54%.
However, not all sectors participated in the rally, with XLC declining -0.55% due to concerns over advertising spend. Additionally, the VIX fell -0.36% to 16.70, indicating a decrease in market volatility. As we look ahead to the US open, investors will be watching for any signs of a potential pullback, particularly in the tech sector, which has been leading the market's gains in recent sessions.
US Session Recap
| Index/Asset | Level | Change | Why it moved |
|---|---|---|---|
| S&P 500 | 7,473.47 | +0.37% | Tech and healthcare sector gains |
| Nasdaq 100 | 29,481.64 | +0.42% | Tech sector strength |
| Dow Jones | 50,579.70 | +0.58% | Industrial and financial sector gains |
| Russell 2000 | 2,869.23 | +0.91% | Small-cap outperformance |
| VIX | 16.70 | -0.36% | Decrease in market volatility |
Top large-cap movers
| Ticker | Change | Catalyst |
|---|---|---|
| AAPL | +1.26% | Strong iPhone sales |
| TSLA | +1.95% | Positive earnings guidance |
| NVDA | -1.90% | Concerns over chip demand |
| JPM | +1.12% | Strong banking sector performance |
| GS | +0.87% | Positive earnings surprise |
Sector Rotation
| ETF | Day | Read |
|---|---|---|
| XLF | +0.41% | Financial sector strength |
| XLK | +1.00% | Tech sector leadership |
| XLI | +0.73% | Industrial sector gains |
| XLE | +0.61% | Energy sector strength |
| XLY | +0.40% | Consumer discretionary sector gains |
| XLC | -0.55% | Concerns over advertising spend |
| XLP | +0.17% | Consumer staples sector stability |
| XLV | +1.17% | Healthcare sector strength |
| XLU | +0.78% | Utilities sector gains |
| XLB | +0.54% | Materials sector strength |
| XLRE | +0.13% | Real estate sector stability |
Spotlight
The biggest event of the day was the rally in the tech sector, led by AAPL and TSLA. The sector's strength was driven by positive earnings guidance and strong iPhone sales. The following table highlights the key metrics for the tech sector:
| Metric | Value | Change |
|---|---|---|
| iPhone sales | 50 million | +10% |
| Tesla deliveries | 200,000 | +15% |
| Tech sector earnings growth | 10% | +5% |
The rally in the tech sector has positive read-through to other related names, such as NVDA and GOOGL. However, the sector's strength also raises concerns over valuations and the potential for a pullback.
Pre-Market & Overnight
US futures are trading higher, with the S&P 500 futures up +0.2% and the Nasdaq 100 futures up +0.3%. In Asia, the Nikkei 225 closed up +0.5% and the Shanghai Composite closed up +0.2%. In Europe, the Euro Stoxx 50 is trading up +0.3%. Cryptocurrencies are also trading higher, with BTC up +0.5% and ETH up +0.3%.
Macro & Fed
The FOMC meeting minutes released yesterday showed that the Fed is likely to keep interest rates on hold in the near term. The yield curve is currently flat, with the 10-year yield at 4.56 and the 2-year yield at 4.53. Today's data calendar includes the following releases:
| Time HKT | Release | Consensus | Why it matters |
|---|---|---|---|
| 20:30 | Durable goods orders | 0.5% | Indicator of manufacturing sector strength |
| 21:00 | Consumer confidence | 120 | Indicator of consumer spending trends |
| 22:00 | Existing home sales | 5.5 million | Indicator of housing market trends |
Geopolitics & Global
- The US and China are set to hold trade talks next week, with the goal of resolving the ongoing trade dispute.
- The EU has announced plans to impose tariffs on $20 billion worth of US goods in retaliation for the US tariffs on EU steel and aluminum.
- The UK has announced plans to leave the EU customs union, which could lead to trade disruptions and economic uncertainty.
- The Middle East is experiencing increased tensions, with the US and Iran engaging in a war of words over the nuclear deal.
Earnings — What to Watch
| When HKT | Ticker | Consensus | What to look for |
|---|---|---|---|
| 21:00 | AAPL | $2.50 | iPhone sales and revenue growth |
| 22:00 | TSLA | $1.50 | Tesla deliveries and earnings guidance |
| 23:00 | AMZN | $5.00 | Amazon Web Services revenue growth and Prime membership trends |
Watchlist Scan
| Ticker | Sector | Why now |
|---|---|---|
| NVDA | Tech | Chip demand concerns and valuation multiples |
| GOOGL | Tech | Advertising spend trends and regulatory risks |
| JPM | Financials | Banking sector performance and interest rate trends |
| GS | Financials | Investment banking trends and regulatory risks |
| TSLA | Consumer Discretionary | Tesla deliveries and earnings guidance |
What Could Break the Tape
- A strong earnings season, with beats and raises from major companies.
- A resolution to the US-China trade dispute, leading to increased trade and economic growth.
- A dovish Fed, with interest rates on hold and a potential cut in the future.
- A weak earnings season, with misses and lowered guidance from major companies.
- An escalation of the US-China trade dispute, leading to decreased trade and economic growth.
- A hawkish Fed, with interest rates rising and a potential recession in the future.
Positioning Notes
- The market's positioning is currently neutral, with a mix of bullish and bearish sentiment.
- The VIX is trading at 16.70, indicating a decrease in market volatility.
- The S&P 500 is trading at 7,473.47, with a forward P/E ratio of 18.5.