Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
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THE GIST (“THE WHAT”)
Global economic concerns overshadowed strong earnings after China reported its slowest pace of GDP growth rate in 27 years. Rotation out of cyclicals and into the defensive stocks pushed the S&P500 index below its closely-watched psychological 3000 mark. Early session losses were compounded alongside sharp drop in Boeing and Johnson & Johnson.
Losses were pared mid-session amid a strong batch of earnings. A sharp leg lower going into the close pushed the index to close at 2986.20, albeit well off of session lows, down 11.75 points and losing 0.39% over previous session’s close. Seven out of the eleven primary sectors were led lower by Technology and Communication Services.
THE DETAILS (The “How & Why”):
China’s GDP growth last quarter dropped to 6% to its lowest level in 3 years, providing evidence that the long ongoing trade war has started taking toll on the world’s second largest economy. On the bright side, domestic stimulus measures provided enough support to boost industrial production and retail sales in the country. Global economic concerns coupled with fading expectations of a Brexit deal pushed Treasury yields lower across maturities.
Boeing Co and Johnson & Johnson were other weak areas of the choppy session. Boeing Co tanked 6.79% following reports that the aviation giant withheld information and misled the FAA about its troubled 737 Max jet. Johnson & Johnson also weighed down heavily on the index, sinking 6.22% in its worst day in 10 months after it recalled 33,000 bottles of its widely-used baby powder that were found contaminated with asbestos.
Technology sector fared the worst in Friday’s choppy session, down 0.91% led by steep drop in semiconductors across the board. DXC Technology Co and Micron Technology Inc. slipped 5.23% and 4.46%, respectively. A 2.38% drop in Facebook Inc. weighed down on Communication Services space.
Credit Suisse downgraded the retail sector, citing weakening trends that could extend into the holiday season. L Brands Inc. posted the worst declines of the session, tumbling 9.89% on stock downgrades. Macy’s Inc., Under Armour Inc. and Gap Inc. were the other major decliners, all falling more than 4% apiece.
Limiting day’s losses, defensive stocks outperformed alongside falling yields as investors rotated out of cyclicals and into defensive space. Real Estate sector led the advances with a 0.98% gain. Utilities and Consumer Staples added 0.37% and 0.19%, respectively.
A slew of strong quarterly results also helped trim day’s losses. Kansas City Southern, Intuitive Surgical Inc. and E*TRADE Financial Corp. were among the top gainers of the session on beating earnings estimates, jumping 7.26%, 6.96% and 4.64%, respectively.