Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 06/4” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
The S&P 500 index struggled for direction amid intensifying trade tensions and renewed concerns of regulatory and political risks on big tech giants. Broad-based sell-off in tech-heavy sectors negated a strong rebound in Materials and Energy stocks. Unable to regain the key technical support level of 200 DMA (now at 2775.02), the index whipsawed within a relatively wide range to close off of session lows at 2744.45, down 7.61 points and losing 0.28% over previous session’s close.
THE DETAILS (The “How & Why”):
Communication Services was the biggest drag on the index, down 2.79%, followed by Technology and Consumer Discretionary, down 1.76% and 1.18%, respectively. Reports that the FTC (Federal Trade Commission) and Department of Justice (DoJ) will launch an antitrust probe on Facebook Inc. and Google’s parent Alphabet Inc. revived concern of regulatory and political risks for big tech-giants, sparking a broad-based sell-off in technology stocks.
Facebook Inc., Alphabet Inc., Twitter Inc. and Amazon.com Inc. tumbled 7.51%, 6.12%, 6.11% and 5.52%, respectively. Microsoft corp. and Apple Inc. also closed lower by 3.10% and 1.01%. Fueling losses within this space was Salesforce.com Inc., declining 4.17% ahead of its earnings release after JP Morgan & Chase removed the cloud-based software company from its Focus List.
On the other hand, supporting the day’s gains was a strong rebound in Materials stocks on the back of a slide in U.S. Dollar index amid growing expectations that the Federal Reserve might lower its benchmark interest rates in the wake of mounting recession jitters. The sector closed sharply higher by 3.42% with all its components trading higher for the day.
Energy stocks were also strong performers of the session, up 1.37%, despite oil prices extending their declines and falling to their 3-month lows. Consumer Staples and Utilities were the other strong gainers of the session, closing higher by 1.32% and 1.03%, respectively.
Meanwhile, increasing demand for safe-haven bonds pushed Treasury yields lower for the fifth session in a row. The 10-year Treasury yield hit its lowest level in two years to settle at 2.092%, edging closer to the psychologically important 2% level. The closely watched yield spread between the 3-month Treasury and 10-year Treasury further deepened into negative territory. Financials stocks, however, traded higher for the day, by 0.69%. Industrials and Real Estate also closed modestly higher, up 0.71% and 0.44%, respectively.