Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 06/3” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
The S&P 500 index’s attempt to regain lost ground was negated after President Trump fueled trade uncertainty by threatening to slap tariffs on all Mexican goods, sending the index to March 11 lows. Registering the worst May since 2010, the index closed lower for the fourth straight week amid intensifying trade tensions and growing fears an impending recession.
Weaker-than-expected manufacturing data out of China further stoked concerns of a global economic slowdown. Led by sharp declines in Technology and Energy stocks, the index closed a yet another choppy session decisively below the key technical support level of 200 DMA (now at 2775.50) and near day’s lows at 2752.06, down 36.80 points and losing 1.32% over previous session’s close.
THE DETAILS (The “How & Why”):
In an attempt to press Mexico to curtail the flow of illegal immigrants into the U.S., President Trump threatened to slap 5% tariffs on all Mexican imports that could be raised to 25%, surprising investors that were broadly expecting that the President would rescue the weakening stock markets.
Trade-sensitive stocks fell hard in today’s panic sell-off. Technology, retail, auto and transportation stocks all traded lower across the board. Communication Services sector was the worst percentage decliner of the session, down sharply by 2.05%, led lower by a 4.36% plunge in Verizon Communications after UBS downgraded its stock, citing concerns of growing competition from Amazon.com after the online retail giant announced its plan to enter the wireless service space. Facebook Inc. led the FANG components lower with a 3.03% decline.
Oil prices tumbled more than 5%, falling to their lowest level in more than three months on the back of growing concerns that the intensifying trade tensions could trigger global economic slowdown, thus weakening global energy demand. Energy sector was the next worst percentage decliner of the session, down 1.61%. Cimarex Energy Co., HollyFrontier Corp., Occidental Petroleum Corp. and Marathon Oil Corp. all fell more than 3% each.
Industrials, Materials, Consumer Discretionary and Financials were all sharply lower for the day, down 1.46%, 1.24%, 1.44% and 1.48%, respectively. Treasury yields extended their declines for the fourth session in a row, with the 10-year Treasury yield slipping to its 20-month low at 2.136% as investors continue piling up on safe-haven bond assets in the wake of growing uncertainty over President Trump’s trade policies and increasing odds of a prolonged trade war.
On the bright side, limiting the day’s losses were Real Estate and Utilities, the only two sectors to benefit from falling yields and closing modestly higher by 0.77% and 0.44%, respectively.