Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Tue, 07/31” will be posted Mon, 07/30 night – please check back around 10:30pm/11pm EDT.
THE GIST (“THE WHAT”)
Falling for the third straight day as big cap FANG stocks extend their Facebook and Twitter induced sell-off, the S&P 500 index closed near session lows, at 2802.60, down 16.22 points and losing 0.58% over previous session’s close. The index held on to the technically important 2800 support level, the level it has successfully tested over the past several sessions since July 12.
Attempting to reverse losses during the mid-day session and bouncing off on registering the day’s low at 2798.11 (Just over 3 points away from the level indicated by our models to negate the current bullish bias to bearish. Click here to read the full report ), the index was pulled back as weakness in Technology stocks offset strong gains in Telecommunications sector.
THE DETAILS (The “How & Why”):
Extending last week’s losses and leading the declines for the third day in a row, Technology sector shed another 1.78%, closely followed by a 0.78% loss in Consumer Discretionary sector. Twitter Inc., Netflix Inc. and Facebook Inc. further deepened their losses, losing 8.03%, 5.70% and 2.19%, respectively, weighing down on the entire FANG group.
Further dragging the broader sector lower were stocks of video game companies Take-Two Interactive Software Inc. and Electronic Arts Inc., down 7.73% and 5.68% on reporting disappointing earnings last week. Investors will be closely watching third quarterly result of Apple Inc. due post Wednesday’s session.
Other notable decliners in today’s session were Industrials, Utilities and Materials sectors, down 0.94%, 0.60% and 0.23% respectively. Airlines companies fueled losses within the Industrials sector on concerns of rising fuel prices. Tyson Foods Inc. and Sysco Corp were among the worst performing stocks in the index, losing 7.61% and 6.73%, dragging the broader Consumer Staples sector lower by 0.07%.
On the other hand, limiting the day’s losses was a 1.95% gain in the Telecommunications sector. AT&T Inc. rose 2.96% after Bank of America upgraded the Telecom giant’s stocks from neutral to buy citing its strong fundamentals post-merger with Time Warner Corp.
Oil prices rose for the first time in a week on tighter supply concerns, boosting Energy sector by 0.84%. Health Care and Financials sectors also ended the day with slight gains of 0.10% and 0.02% respectively. The 10-year Treasury yield inched up 1.9 basis points to settle at 2.975%, moving closer to the psychologically important 3% ahead of the FOMC monetary policy meeting on Wednesday. Investors will be looking forward to a reassurance from the Federal Reserve for two more rate hikes this year.