Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 06/17” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
Intense selling of semiconductor stocks weighed down heavily on the S&P 500 as concerns of weakening demand for technology products was once again revived after Broadcom Inc. missed revenue estimates and lowered its guidance in the wake of U.S.’s ban on Huawei Technologies. Modest gains in Utilities, however, helped limit losses.
A late session rally lifted the index briefly into a positive territory. But unable to hold on to gains, the index pulled back sharply in the last few minutes of trading to close off of session lows at 2886.98, down slightly 4.66 points and losing 0.16% over previous session’s close. Price action remains range bound and confined within key support and resistance levels ahead of the keenly-awaited FOMC policy statement release next week and G20 Summit at the end of the month.
THE DETAILS (The “How & Why”):
Broadcom Inc. tumbled 5.57%, sending all the other chip stocks sharply lower after its missed revenue expectations and warned of waning demand for chips amid a protracted trade war between U.S. and China and a U.S. ban on Huawei Technologies. Advanced Micro Devices Inc., Micron Technology Inc., NVIDIA Corp, Qorvo Inc. and Skyworks Solutions Inc. all dropped more than 2% apiece. Technology sector was the biggest drag on the index, closing lower by 0.83%.
Energy stocks were also broadly sold-off on the back of profit-taking despite oil prices closing higher for the second session in a row on concerns of a temporary disruption in crude oil supply. Noble Energy Inc. and Cimarex Energy Co led the sector lower, falling 5.01% and 3.64%, respectively. Materials, Industrials and Health Care stocks also added to the day’s losses.
In the economic data, U.S. retails sales in the month of May increased 0.5% and April retail sales was revised to a 0.3% increase compared to an estimated decline of 0.2%. A resilient retail sales data helped overshadow disappointing industrial data out of China that rose at 5% year-on-year in May, growing at its slowest pace in 17 years.
The 10-year Treasury yield settled mostly unchanged ahead of the highly-awaited Federal Reserve’s policy meeting next week. While the market is not expecting a rate cut this month, investors will be closely watching for signs for potential rate cuts later this year.
Defensive sectors once again outperformed the broader index. Utilities were the strongest performers of today’s choppy session, closing higher by 0.99%. Facebook Inc. boosted the Communication Services space after the social media giant jumped 2.18% on announcing its venture into cryptocurrency and partnering with Visa Inc., Mastercard Inc., PayPal Holdings Inc. and Uber Technologies Inc.