Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan” will be posted around 9:00am EDT, every trading day.
For the Outlook, Forecast, and Trading Plans published this morning, please click here
For the last published Results of the Morning Trading Plans, please click here.
THE GIST (“THE WHAT”)
Mounting demand for safe-haven assets amid intensifying recession jitters and trade policy uncertainty continues to weigh down on equity markets. Treasury yields plummeted to their 52 week lows, sparking a sell-off of banking and financial stocks. Reports of escalating protest in Hong Kong over an extradition bill introduced earlier this year further dampened sentiment.
Losses accelerated in the afternoon session, with all primary sectors sharply sold-off led by Financials. Energy, Materials and Consumer Discretionary also suffered strong losses, dragging the S&P 500 index to close near session lows at 2882.70, down 35.95 points and losing 1.23% over previous session’s close.
THE DETAILS (The “How & Why”):
With earnings season at its tail-end, price action continues to be driven by trade and geopolitical headlines. Nervous investors continue piling up on safe-haven Government bonds, sending the benchmark 10-year Treasury yield to October 2016 lows at 1.65%. The spread between widely-watched recession indicator of 2-year and 10-year yield narrowed to its near lowest level since 2007. Investors will be closely reading into July consumer-price index and retail sales data due this week for signs of economic weakening.
Financials were the worst performing sector, down broadly by 1.93%. Synchrony Financials and Citigroup Inc. fell 3.77% and 3.06%, respectively. Bank of America Corp, Comerica Inc., Goldman Sachs Group Inc., Morgan Stanley and SVB Financial Group all slipped more than 2% apiece.
A sharp 8.16% decline in Mosaic Co. led the Materials space lower by 1.58%. Technology, Industrials, Consumer Discretionary and Energy also suffered strong losses, all of these sectors closing more than 1% lower in today’s panic selling. Retail stocks traded lower ahead of key earnings. Walmart and Macy’s are scheduled to release their quarterly results later this week.
Among individual stocks, Nektar Therapeutics extended last session’s drop, plunging another 11.19% after announcing manufacturing issues in two experimental drugs that led several analysts to downgrade its stock. Corteva Inc. and Symantec Corp. were the other worst decliners of the session, down 6.45% and 5.74%, respectively.
With yields plunging to their multi-year lows, defensive and dividend-paying Utilities, Real Estate and Consumer Staples posted only mild declines, faring relatively better in today’s broad-based sell-off.