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For the Results of the morning’s Trading Plans, please click here.
THE GIST (“THE WHAT”)
A surprisingly strong Friday’s jobs report dented hopes of a much-expected Fed rate cut at the end of this month, weighing down on investor sentiment for the second straight session in a row. Morgan Stanley downgraded global equities, sparking a flight to safety towards Treasuries that pushed the yields lower and flattened the yield curve the most in over a month.
Mirroring Asian markets, the S&P 500 gapped down sharply at the open. Maintaining the losses throughout the session and chopping within a tight range, the index closed off of session lows at 2975.95, down 14.46 points and losing 0.48% over previous session’s close. Six out of the eleven primary sectors traded lower, with Materials leading the declines. Volume remained low coming out of the holiday-shortened week.
THE DETAILS (The “How & Why”):
Friday’s stronger-than-expected jobs report dimmed the broader optimism that the central bank will cut its benchmark interest rate in an attempt to support the current economic expansion. Treasury yields edged lower as investors keenly await Fed Chairman Jerome Powell’s semi-annual testimony to the U.S. Congress later this week, looking for further guidance on the central bank’s future course of interest rates.
The 10-year Treasury yield, however, rebounded from its early session slide to settle slightly higher at 2.049%. Investors will also be closely reading into the CPI (Consumer Price Index) data this week, a key inflation indicator that the Fed monitors. Interest-sensitive defensive sectors benefitted from sliding yields. Real Estate posted a modest 0.37% gain.
Consumer Discretionary, Consumer Staples and Utilities were the other gainers of the session. Growing geopolitical tensions lifted oil prices higher, lifting Energy stocks slightly by 0.10%.
Meanwhile, stronger-than-expected economic data strengthened the dollar further, weighing down heavily on the dollar-sensitive sectors for the second session in a row. Materials posted the worst declines of the session, down 1.06%.
Apple Inc. dragged the Technology space lower, falling 2.06% following stock downgrade by Rosenblatt from neutral to sell, citing fundamental deterioration due to falling demand for iPhones that could erode future profitability. IPG Photonics Corp. and F5 Networks Inc. were the other major decliners within this space, falling 5.21% and 3.83%, respectively.
Boeing Co. shed another 1.35% on weekend reports that it has the lost a $5.9 billion order for its now grounded 737 Max planes to its biggest rival Airbus A320 jets. Biotech stocks also extended their last week’s weakness, dragging the broader Health Care space lower by 0.75% on growing regulatory concerns over drug pricing. DaVita Inc., Alexion Pharmaceuticals Inc. and Nektar Therapeutics posted the worst declines, all lower by more than 2% apiece.