Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 05/21” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
With U.S. – China trade tensions simmering in the background, the S&P 500 index closed lower as investors continue to sell trade-sensitive stocks. Semiconductors and blue-chip technology stocks fell sharply after they started complying to the White House order of curbing all sales to Chinese telecom giant Huawei Technologies.
Gapping lower, the index traded lower for the session on a choppy price action to close off of session lows at 2840.23, down 19.30 points and losing 0.67% over previous session’s close. Eight out of the eleven primary sectors traded lower, with Technology, Real Estate and Materials registering the biggest percentage declines.
THE DETAILS (The “How & Why”):
Technology stocks continue to face the brunt of the intensifying US – China trade tensions. The sector led the index lower with a sharp 1.75% decline. Trump administration’s ban on all sales to Huawei Technologies after the Chinese giant was added into the trade blacklist sent several blue-chip technology and chipmaker stocks tumbling as they started suspending their business with the world’s largest supplier of smartphones.
Keysight Technologies Inc., maker of equipment that goes into 5G wireless technologies with exposure to Huawei was the worst decliner of the session, tumbling 8.92%. Qualcomm Inc., Broadcom Inc., Applied Materials Inc. and Lam Research Corp. all dropped more than 5% each. Intel Corp., NVIDIA Corp, Micron Technology Inc. and Qorvo Inc. were all sharply lower for the day.
Google parent Alphabet Inc. fell 2.06% after it announced that it will restrict Huawei’s access to all future updates of its Android operating software. Apple Inc. fueled the losses within the technology space; falling 3.13% after several analysts downgraded and cut prices of the iPhone maker citing shrinking iPhone demand and tariff impact in the wake of mounting trade tensions with China.
Real Estate, Materials and Communication Services were the other major laggards of the choppy session, down 1.62%, 1.46% and 1.17%, respectively. Communication Services and Consumer Discretionary were the other notable decliners, down 1.17% and 0.69%, respectively.
On the bright side, Treasury yields inched higher to benefit banking and financial stocks to close slightly higher by 0.14%. Utilities also closed 0.17% higher on the back of falling risk-appetite and broad-based sell-off of growth stocks. Meanwhile, limiting losses within the Communication Services sector, Verizon Communications Inc. and AT&T Inc. gained 1.58% and 1.23%, respectively on reports that the FCC Chairman has endorsed the merger of Sprint Corp. and T-Mobile Inc. on condition that they will commit themselves to build a new 5G system covering 90% of rural America within 6 years.