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THE GIST (“THE WHAT”)
Selling resumed after a brief 2-day pause after President Trump stoked trade tensions by telling reporters that the U.S. – China trade talks that were scheduled for September could be cancelled. Technology stocks once again faced the brunt of nervous investors after President Trump threatened that the U.S. will no longer do any business with Huawei Technologies.
Tumbling sharply at the open, the S&P 500 index found support at the psychologically important 2900 level and recovered most of its day’s losses of close to 1.05% after the White House clarified that only the U.S. government will be holding off buying from Huawei. Grinding higher for most part of the afternoon session, a pullback during the last few minutes of trading dragged the index lower.
THE DETAILS (The “How & Why”):
However, closing the session well off the lows, the index ended the rollercoaster week that was rattled by fears of recession and a currency war between U.S. and China only modestly lower at 2918.65, down 19.44 points and losing 0.66% over previous session’s close.
In his latest ire against China, President Trump threatened to cancel the scheduled trade talks with China and ending all business with Huawei Technologies. The broader Technology sector was the biggest drag on the index, closing 1.25% lower as chipmakers and big tech stocks resumed their slide on heightening trade tensions.
While Xilinx Inc. posted the worst decline of 5.11%, Skyworks Solutions Inc., Qorvo Inc., Microchip Technology and Lam Research Corp. fell more than 2% apiece. DXC Technology Co. weighed down heavily down on the tech space, plunging 30.47% in its worst day on record after the IT service provider slashed its full year guidance.
Energy stocks fueled the day’s losses, falling broadly alongside a slide in oil prices. An IEA report indicated that global oil demand growth for the first half of the year was at the slowest pace since the financial crisis, primarily due to slowing demand from China. Growing concerns of fading global demand amid intensifying trade tensions overshadowed expectations of OPEC production cuts. Hollyfrontier Corp and EQT Corp registered the worst decline within this space, down more than 4% apiece. TechnipFMC PLC and National Oilwell Varco Inc. closed more than 3% lower each.
Consumer Discretionary, Industrials and Communication Services sectors were the other notable decliners of the wild session, down 0.97%, 0.83% and 0.80%, respectively. Among strong individual movers, Nektar Therapeutics crashed 29.25% on posting weaker-than-expected quarterly earnings. The biotech giant fell to its 2-year lows on announcing manufacturing issues in two experimental drugs that led several analysts to downgrade its stock.
Meanwhile, defensive dividend-paying sectors managed to buck the trend and hold on to marginal gains alongside low Treasury yields as nervous investors continue flocking towards safe haven assets. The 10-year Treasury yield settled its choppy session slightly higher at 1.748%. Health Care, Real Estate and Utilities were the only sectors to close slightly in the green.