Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Wednesday, 05/08” will be posted around 8:30am EDT, Wednesday.
THE GIST (“THE WHAT”)
Intense selling for the second straight session amid growing uncertainty around U.S. – China trade talks sent the S&P 500 index tumbling to its one month-low. Escalating trade tensions sparked a sell-off across all sectors after U.S. Trade Representative Robert Lighthizer confirmed Monday that the Trump administration could announce an increase in tariffs from 10% to 25% on $200 billion worth of Chinese goods as early as Friday.
Opening lower, the index maintained a steady stream of declines with all of the eleven primary sectors brutally sold-off on trade jitters. The index, however, rebounded during the last few minutes before the closing bell to close off of session lows at 2884.05, down sharply by 48.42 points and losing 1.65% over previous session’s close.
THE DETAILS (The “How & Why”):
The S&P 500 index was sent tumbling on Monday after President Trump spooked investors by tweeting that his administration could likely announce an increase in tariffs from 10% to 25% on $200 billion worth of Chinese goods. Although the index rebounded Monday afternoon on reports that China will send its delegation to the U.S. as originally planned to resume negotiations, stocks were sold-off hard Tuesday after Robert Lighthizer told reporters that China has backtracked on some of its promises and could face a new round of tariffs from Friday.
Trade-sensitive stocks with large exposure to China across Technology, Industrials and Materials continued to plunge for the second session in a row. Micron Technology Inc., NVIDIA Corp. and Qualcomm Inc. shed 4.44%, 3.75% and 3.46%, respectively. Other semiconductor stocks including Microchip Technology, Lam Research Corp and Advanced Micro Devices Inc. all fell more than 2% each.
Apple Inc., Boeing Corp. and Caterpillar Inc. extended their decline, falling another 2.70%, 3.96% and 2.26%, respectively amid escalating trade tensions. After bucking the trend in Monday’s sell-off, Health Care stocks were dragged lower by a 23.81% plunge in Mylan NV. The world’s biggest generic drugs manufacture fell the most since June 2000 after it missed revenue and earnings expectations amid rising manufacturing problems, competition and declining prices.
Real Estate, Consumer Discretionary and Communication Services sectors were also sharply lower for the day, down 1.78%, 1.46% and 1.36%, respectively. Investors continued piling up on safe-haven government bonds, sending Treasury yields lower. The 10-year Treasury yield settled at its lowest level in a month at 2.465% hurting Financials stocks to close 1.69% lower.
On the bright side, stocks to buck the trend and rise on the back of strong first quarterly earnings were American International Group Inc., Henry Schein Inc. and Everest Re Group Ltd., all jumping 6.77%, 5.42% and 3.83% on posting impressive quarterly results.