Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 05/14” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
China’s retaliatory move of raising tariffs on $60 billion worth of U.S. imports by as much as 25% sent the S&P 500 index tumbling in its worst day in 2019. Investors sold-off riskier equities in favor of safe haven assets amid mounting concerns of global economic slowdown in the face of rising trade tensions between the world’s two largest economies, sending Treasury yields lower.
Intense selling continued throughout the afternoon session. The index pared some of the losses late session, only to be pulled back to close near session lows at 2811.87, down sharply by 69.53 points and losing 2.41% over previous session’s close. Ten out of eleven primary sectors were broadly sold-off in today’s panic selling, with Technology sector leading the declines.
THE DETAILS (The “How & Why”):
Technology sector was the worst hit in today’s meltdown, closing 3.71% lower, with semiconductor stocks brutally sold-off. Seagate Technology PLC, Skyworks Solutions Inc., Advanced Micro Devices Inc., Microchip Technology and NVIDIA Corp, all fell by more than 7% each. Apple Inc. fueled the declines, falling 5.81% on reports that the iPhone owners can now sue the iPhone maker for monopolizing the App Store.
Consumer Discretionary, Industrials and Communication Services were also broadly sold-off to close lower by 2.95%, 2.84% and 2.52%, respectively. Commodities and oil prices fell across the board on fears that the trade war between the two largest economies could push the global economy into recession. Materials and Energy sectors closed lower by 2.18% and 1.58%, respectively.
Investors fled towards the flight of safe-haven Government bonds, sending the Treasury yields lower. The yield curve between the 10-year Treasury yield and 3-month Treasury yields inverted once again, fueling losses within the banking and financial sector to close sharply lower by 2.87%.
Health Care sector was dragged lower by generic drug makers. Mylan N.V. led the sector decline with a 9.43% plunge on reports that 44 states have filed suits against generic drug makers for conspiring to artificially inflate drug prices.
On the bright side, falling yields helped lift yield-sensitive Utility stocks. The sector gained 1.11%. Meanwhile, gold prices rose on the back of rising demand for safe-haven assets, benefiting gold mining stocks. Newmont Goldcorp Corp. and American Water Works Co. were the top gainers in today’s volatile session, jumping 2.52% and 2.24%, respectively.