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THE GIST (“THE WHAT”)
Choppy directionless session closed sharply lower amid skepticism ahead of the next round of high level U.S. – China trade talks that are schedule to resume later this week. Losses accelerated during the afternoon session, pushing the index to close near session lows at 2938.79, down 13.22 and losing 0.45% over previous session’s close. Energy and Consumer Staples led the modest declines across sectors.
THE DETAILS (The “How & Why”):
Expectations that both the disputing parties will show urgency in resolving their trade disputes had helped markets partially recover from last week’s steep losses. Weak economic data provided evidence that the long protracted trade war has started bleeding into both the economies and business sentiment that could potentially push the globe into recession.
Hopes of a potential trade truce were dashed following reports that China has significantly narrowed down the key issues to be discussed at the upcoming meeting, while also indicating that commitment to any industrial policy or government subsidies reforms will not be included.
With skepticism kicking in, the index pulled back sharply in the late-afternoon session. Except Communication Services sector that managed to close mostly unchanged, all of the other ten primary sectors posted modest losses in today’s choppy session. Energy was the worst performing sector, down 0.92% alongside a slide in oil prices. Consumer Staples, Industrials and Technology were among the other major decliners of the session.
Treasury yields took a breather from their seven straight sessions of declines ahead of the FOMC’s release of September meeting minutes on Wednesday. The 10-year treasury yield edged 3.7 basis points higher and settled at 1.553%. Investors will be closely reading into the minutes for cues on the Fed’s aggressive loosening of monetary policy. Markets are broadly expecting that the Federal Reserve will follow through with a third rate cut in the wake of softening economic data.
Beneath the choppy directionless price action, Apple Inc. jumped 1.29% following bullish comments by a Nomura Instinet analyst. The tech-giant, however, erased the day’s gains alongside a broad-based sell-off. NVIDIA Corp was another major gainer of the session, climbing 1.30% following bullish comments by RBC Capital, citing growing demand for its gaming products and signs of recovery in its data center division.