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S&P 500 TODAY – WED 07/11
THE GIST (“THE WHAT”)
Trade tensions came haunting back after the Trump administration announced Tuesday its plan to impose a second round of tariffs on Chinese goods, with China vowing to retaliate soon. The index opened Wednesday’s session sharply lower, mirroring a sell-off in global markets, as trade concerns overshadowed optimism ahead of the second quarter earnings season.
Ending a four days streak of strong gains, the index registered the day’s low at 2770.77 (just 0.77 point away from support levels indicated by our models in today’s outlook – click here for the forecast published Tuesday night) as Materials and Energy stocks fell on the back of a slump in commodity prices across the board.
The index closed near session lows at 2774.02 (right within the key support band of 2770-2780 mentioned in our models’ outlook for today – click here for the forecast published Tuesday night), down 19.82 points and losing 0.71% over previous session’s close. All primary sectors, excluding Utilities, ended today’s session in losses.
The index closed near session lows at 2774.02 (right within the key support band of 2770-2780 mentioned in our models’ outlook for today – click here for the forecast published Tuesday night), down 19.82 points and losing 0.71% over previous session’s close. All primary sectors, excluding Utilities, ended today’s session in losses.
THE DETAILS (The “How & Why”):
Oil prices fell close to 5% on easing of global supply concerns after a monthly OPEC report indicated a 500,000 b/d rise in oil production by Saudi Arabia. Libya also announced its plan to resume export activities at its eastern ports, further dragging down oil prices. Energy sector led the day’s declines, losing a sharp 2.15% despite the latest EIA inventory data reporting a larger-than-expected fall in U.S. oil inventories by 12.6 million barrels last week.
Trade sensitive Materials and Industrials sectors were the next biggest laggards in the index, losing 1.69% and 1.62% respectively. Commodity prices fell across the board on concerns of a fall in global demand. Copper prices were hit the hardest following news that the Trump administration plan to impose additional 10% tariffs on $200 billion worth of Chinese imports.
The news came days after the administration imposed 25% tariffs on Chinese imports worth $34 billion. The strengthening dollar further kept prices under pressure. Within the Industrial sector, American Airlines Group Inc. was the worst performer in the index, losing 8.08% after the company reported a cut in its future guidance.
Telecommunication shed 1.05%, led by a 3.98% fall in stocks of 21st Century Fox Inc. after Comcast Corp. sweetened its offer to acquire Sky Plc, raising its bid in a fight with Fox to acquire the European pay-tv giant. On the other hand, Walt Disney Co. gained 1.90% on the back of continued consolidation within the industry. Weakness in chipmaker stocks also weighed down on the broader Technology sector that shed 0.51%.
Consumer Discretionary, Consumer Staples and Health Care sectors were down 0.23%, 0.34% and 0.79%, respectively in today’s broad-based sell-off. Lastly, extending losses from previous session, Financials shed a further 0.52% alongside a fall in yields on trade war concerns. The 10-year Treasury yield closed a volatile session down a slight 1 basis point at 2.847%, despite rising inflationary pressure suggested by a 3.4% rise in the Producer Price Index, its largest annual increase since November 2011.