Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Monday, 08/13” will be posted by 7:30am/8:00am EDT, Monday.

THE GIST (“THE WHAT”)

Ending its long winning streak of five weeks, the S&P 500 index plunged at the open mirroring European markets that tumbled alongside a record weakness in Turkish Lira on concerns of trouble for European banks with large exposure to the currency. Falling for the third straight day in a row and erasing the entire week’s gain, the index found support at its 20 DMA (now at 2825.64), bouncing off on registering the day’s low at 2825.81.

Yields fell sharply as intensifying geopolitical concerns led nervous investors towards safe haven bonds, hurting the broader Financials sector. Materials stocks led the decliners as metal prices fell across the board with intensifying trade tensions. With ten out of the eleven primary sectors ending the session lower, the index closed off session lows at 2833.28, down 20.30 points, losing 0.71% over previous session’s close and with a weekly loss of 0.25%. 
Strong corporate performances in the second quarter helped the index to recover from January’s deep correction, taking the index near a striking distance from January 26, 2018 highs early this week. However, the index lacked the conviction to register record highs, instead falling by 0.25% by the end of the week as investors turn their attention back towards the escalating trade and geopolitical tensions with the earnings seasons now drawing to an end.


THE DETAILS (The “How & Why”):

In its worst day since the financial crisis of 2001, the Turkish Lira fell close to 17% against the U.S. dollar after President Trump doubled the tariffs on Turkish steel and aluminum, further deepening the country’s currency crisis. European banks fell sharply on worries of contagion, which had a ripple effect on U.S. bank stocks. Financials stocks shed 1.16% as investors flocked to safe haven bonds, driving the 10-year Treasury yields to a 2 month low, falling by 5 basis points to settle at 2.87%. Yields however stabilized during the mid-day session following a moderate CPI data that indicated gradually increasing inflationary pressures, reaffirming further rate hikes by the Federal Reserve.
Materials sector was the biggest decliner in the broader index, down 1.43% as metals prices fell across the board on intensifying geopolitical concerns. The broader Technology sector was sent lower by 0.81% led by semiconductor stocks that fell after Morgan Stanley downgraded the industry, citing elevated chip inventory levels.  Microchip Technology Inc. was among the worst performers in the index, losing 10.88% on reporting we
aker guidance.
Among the other notable decliners sector-wise were Real Estate, Consumer Discretionary and Industrials, all ending the session lower by 1.00%, 0.83% and 0.81% respectively.  Other defensive sectors, including Health Care, Telecommunications and Consumer Staples also shed 0.39%, 0.74% and 0.32% respectively in today’s broad based sell-off. News Corp was the worst performer in today’s session, plunging 13.50% on reporting a $1.4 billion net loss.
Energy was the only sector limiting the day’s losses as oil prices stabilized after falling sharply in the last 2 sessions. The sector edged up 0.27% after a monthly report by the International Energy Agency indicated an increase in global oil demand by 110,000 b/d.