Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Friday, 05/10” will be posted around 8:30am EDT, Friday.
THE GIST (“THE WHAT”)
The S&P500 index closed lower for the fourth session in a row, albeit significantly off its day’s lows as price action continues to be driven by U.S. –China trade headlines. The index fell sharply in the early session amid increasing rhetoric by President Trump over China’s backtracking on its trade deal commitment. His tweet late Wednesday that China “broke the deal” sent trade-sensitive stocks tumbling.
However, paring losses in the afternoon session, the index bounced off the day’s low of 2836.40 after President Trump told reporters that Chinese President Xi Jinping wrote him a “beautiful letter” and that a trade deal could still be possible. With Technology sector leading the declines amid weakness in semiconductor stocks, the index closed off of session lows at 2870.72, down 8.70 points and losing 0.30% over previous session’s close.
THE DETAILS (The “How & Why”):
Technology sector led the declines in Thursday’s volatile session, closing the session lower by 0.68%. Intel Inc. continued to weigh down on semiconductor stocks, plunging another 5.32% following stock downgrades a day after the chip maker posted a weaker sales outlook for the next three years. IPG Photonics Corp., Seagate Technology PLC and Microchip Technology were the other major decliners of the session, falling 3.16%, 3.00% and 2.36% respectively.
Apple Inc., Boeing Co and Caterpillar Inc. shed another 1.07%, 1.61% and 0.46%. Consumer Discretionary sector was the other notable decliner of the session, down 0.43%. Auto, transportation and retail stocks closed broadly lower amid growing fears of full-blown U.S. – China trade war.
While global oil prices gained ground in the afternoon session following reports of a decline in OPEC output, the broader Energy sector closed mostly unchanged for the day. Occidental Petroleum Corp. hit a 10-year low, tumbling 6.44% after Chevron Corp backed off from the acquisition battle for Anadarko, announcing that it will not be raising its bid to acquire Anadarko, citing costs concerns. Chevron Corp. rose 3.14% following the announcement.
Investors continued to pile up on safe-haven bonds amid trade jitters, sending yields lowers. The 10-year Treasury yield briefly fell below the 3-month Treasury yield to 2.451%, inverting for the first time since March to flash a recession signal. The yield gap, however, moved back to positive in the afternoon session after President Trump’s comment helped ease trade jitters. The only sector to close the choppy session with gains was Real Estate, closely modestly higher by 0.33% on the back of falling yields.