S&P 500; US Indexes Fundamental Daily Forecast – Sector Rotation Causing Mixed Results

The U.S. major stock indexes closed mixed again on Friday with the Dow closing lower this time. Mixed performances by a few key sectors and stocks has caused mostly sideways action in the markets the past few days.

In the cash market, the benchmark S&P 500 Index finished the session at 2502.22, up 1.62 or +0.06%, the blue chip Dow Jones Industrial Average settled at 22349.59, down 9.64 or -0.04% and the tech-based NASDAQ Composite ended the session at 6427.94, up 5.25 or +0.08%.

Earlier in the week, it was the financial sector, but on Friday it was the healthcare sector that drove the price action. After opening sharply lower and drifting further to the downside early in the session, health care stocks climbed more than half a percent from session lows to close up 0.08 percent. Biotech and pharmaceutical stocks also participated in the turnaround.

The impressive turnaround in the sector was fueled when Senator John McCain, R-Arizona, said he “cannot in good conscience vote for the Graham Cassidy proposal.

McCain is one of four Republican senators who are undecided on the GOP healthcare overhaul, and his opposition dealt the bill’s chances a significant blow.

Apple stock continued to be the biggest drag on the Dow Jones Industrial Average, but losses were limited by the recovery in health care stocks.

Healthcare and energy helped move the S&P 500 Index higher. However, telecommunications led gainers due to potential merger talk between Sprint and T-Mobile.

The price action late in the week in the stock indexes suggests investors are looking for a catalyst to drive the market higher. Money seemed to be switching back and forth between the sectors. Money flowed into the financials after the Fed meeting on Wednesday then into the health care and energy sectors later in the week.

Money may have also been flowing out of stocks given the higher yields offered by Treasurys and the flight-to-safety selling related to a threat by North Korea to detonate a hydrogen bomb in the Pacific Ocean.

Over the near-term we could continue to see a choppy, two-sided trade until the sectors start firing in the same direction. The current sell-off in Apple also seems to have disrupted the markets especially the Dow Jones Industrial Average and the NASDAQ Composite.