Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Monday, 11/12” will be posted around 8:30am EDT, Monday.
THE GIST (“THE WHAT”)
Mirroring global equity markets sell-off, the S&P 500 index extended its slide falling sharply at the open as oil prices fell further into the bear market. China’s weaker-than-expected Producer Price Index (PPI) reading revived fears of a slowing global economy. A key inflation metrics, the U.S. PPI jumped to its highest level in six years, dampening sentiment on concerns that rising production costs will eventually cut into profit margins of companies.
The index maintained its steady decline for most part of the session alongside a sell-off in Technology stocks. The index, however, trimmed losses in the last 2 hours of the session as defensives stocks offset some of the tech-weakness.
Holding on to the critical support of 200 DMA (now at 2763.03), the index bounced back on registering the day’s low at 2764.24 to close off of session lows at 2781.03, down 25.82 points and losing 0.92% over the previous session’s close. The mid-week’s post-election relief rally, however, helped the index to close the week with strong gains of 2.13%, up for the second week in a row.
THE DETAILS (The “How & Why”):
Technology, Consumer Discretionary and Communication Services sectors were the biggest drag on the index, down 1.66%, 1.50% and 1.45% respectively. FANG stocks extended their slide, falling on concerns that these highly valued companies will be discounted in rising interest rate environment.
Leading the Technology sector lower was Activision Blizzard Inc., plunging 12.39% to its May 2017 lows on issuing a weaker guidance and revealing a decline in its monthly active users. Take-Two Interactive Software Inc. also fell 5.11% on weaker outlook. Skyworks Solutions Inc. led other semiconductors lower, tumbling 8.08% on missing earnings estimates primarily due to softening Chinese demand.
Amazon.com Inc. and Netflix Inc. shed 2.42% and 4.55% to weigh down on the broader Consumer Discretionary sector. Several luxury retail stocks fell sharply on concerns of falling Chinese consumption. Ralph Lauren Corp., Michael Kors Holdings Ltd and Tiffany & Co. declined 6.26%, 4.61% and 5.32% respectively. Further dragging the sector lower were auto and auto parts makers, falling broadly after data from China’s auto industry association indicated that auto sales in the country declined for the fourth straight month by 11.7%. General Motors Co. and CarMax Inc. fell 2.38% and 3.32%.
Metals and commodities continued their slide on concerns of falling global economic growth, weighing down on Materials sector. The sector was sold-off broadly, down 1.37%, with all its components trading lower for the day led by Freeport-McMoRan Inc., down 4.86%.
Industrials, Financials and Energy sectors were the other laggards of the session, down 1.00%, 0.96% and 0.37%, respectively. Oil prices fell for the tenth session in a row, its longest losing streak on record, tumbling deeper into the bear market on concerns of falling global demand coupled with the surging supply from the U.S., Russia and Saudi Arabia.
On the other hand, defensive sectors offset some of the day’s sharp declines as yields inched lower after the Federal Reserve left its benchmark rate unchanged while reiterating its intention to maintain the current pace of rate hikes for the next year. Consumer Staples, Real Estate and Utilities closed the session higher by 0.51%, 0.14% and 0.09% respectively.
Defensive stocks were also the best performers this week amid wild market moves. On the weekly basis, Health Care was the top gainer, up 4.01%, followed by Real Estate and Consumer Staples, up 3.65% and 2.88% respectively.