Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 10/29” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
Panic selling resumed after a brief rebound in Thursday’s session, dragging the S&P 500 index near correction territory and leading nearly half of its components in a bear market. Disappointing revenue of Amazon.com Inc. and weaker outlook by Alphabet Inc. revived fears that trade tensions have started cutting into corporate margins, eventually erasing benefits of stimulus from tax cuts. The third-quarter GDP growth rate was in-line with expectations at 3.5%, but did little to improve sentiment.
Opening on a bearish note, the index attempted to erase some of the steep losses on registering the day’s low at 2628.16, but was pulled back in final hours of trading as investors digested disappointing earnings across sectors, ending the choppy session off of session lows at 2658.69, down 46.88 points and losing 1.73% over previous session’s close. All of the eleven primary sectors ended the session in losses. A brutal weekly loss of 3.94% erased gains for the year and registering the month to be the worst month since February 2009.
THE DETAILS (The “How & Why”):
Technology stocks breathed a sigh of relief in Thursday’s session after Microsoft Corp. and Twitter Inc. came out with a surprise jump in their earnings. Amazon.com Inc. and Alphabet Inc. released their closely watched third quarterly results post session, spooking investors on slower-than-expected growth and weaker guidance. Intense sell-off within the Technology and Consumer Discretionary sectors resumed amid concerns that the highly valued tech stocks might have reached their peak earnings and have started to face the impacts from the recent trade tensions between the U.S. and China.
Concerns of slowing global economic growth is expected to hurt top-line of these international large-cap companies. Amazon.com Inc. fell 7.82%, dragging the broader Consumer Discretionary sector lower by 3.55% as several other retail and department chain stocks also declined in-tandem amid concerns of slowing global demand. However, leading the broader sector lower was Mohawk Industries Inc. The flooring manufacturer plummeted 23.86%, to be the worst decliner of the session on missing sales and earnings estimates.
In its worst day in 4 years, Alphabet Inc. fell 1.80% on missing revenue projections, sparking sell-off within the technology sector. Western Digital Corp. fueled the selling, tumbling 18.18% on weaker-than-expected results and lower guidance. Seagate Technology PLC, Advanced Micro Devices, NetApp Inc. and NVIDIA Corp. were the other sharp decliners within the sector, down 8.94%, 8.51%, 5.80% and 4.59% respectively. While the Technology stocks were broadly sold-off in today’s panic selling, Intel Corporation, Twitter Inc. and Verisign Inc. were modest gainers, up 3.11%, 1.76% and 2.08% as investors continued to digest strong quarterly earnings of these companies.
Among the other notable decliners in today’s broad-based sell-off were Communication Services, Real Estate, Utilities and Consumer Staples, down 2.40%, 2.59%, 1.70% and 1.69% respectively. Financial stocks also fell 1.35%, led by a 12.17% decline in SVB Financial Group on tepid outlook. Treasury yields inched down to their 3-week low amid rising demand for government bonds.
On the bright side, limiting losses amid these steep declines were some out-performers, Roper Technologies Inc., Cabot Oil & Gas Corp. and Cincinnati Financial Corp., up 7.55%, 7.10% and 6.62% on reporting better-than-expected quarterly results.
While Technology and Consumer Discretionary stocks were the most punished in this week’s panic sell-off, Energy was the worst performer for the week, down sharply by 7.06%. Industrials and Materials were the next worst performers of the week, down 5.55% and 4.47% amid concerns of falling corporate margins due to rising manufacturing costs, primarily due to the ongoing trade tensions between the U.S. and China. EQT Corp. and Align Technology Inc. and Advanced Micro Devices Inc. were the worst decliners of the week, down 29.8%, 26.4% and 25.5% respectively.