Note: Our nightly “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 08/14” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
The S&P 500 index rose modestly higher at the open led by a rally in Nielsen Holdings and tech-giants Apple Inc. and Twitter Inc. The index however reversed early gains as the Turkish Lira extended its slide, falling to fresh lows against the U.S. dollar amid Turkey’s ongoing economic turmoil. Energy stocks led the index lower alongside falling oil prices. Materials stocks also dragged the index lower with a strengthening dollar weighing down on metal prices across the board.
Falling for the fourth day in a row and erasing early gains on registering the day’s high at 2843.40, the index closed near session lows at 2821.93, down 11.35 points and losing 0.40% over previous session’s close. Whipsawing within half-a-point away from the bounds of the trading range indicated by our models for a choppy trading range (click here to read the full text), the index held on the 20 DMA support level for the second straight day. Nine out of the eleven primary sectors closed the session lower as investors keep a close watch on the implication of a weakening Lira on European and Emerging markets.
THE DETAILS (The “How & Why”):
Energy stocks were the biggest drag on the index, losing 1.22% on reports of increasing oil production by the OPEC. In an attempt to stabilize oil prices, Saudi Arabia hinted at cutting its crude oil supply. Reports of rising inventories of U.S. crude oil further hurt oil prices. Cimarex Energy Co. and Williams Cos. were among the worst performers in the index, losing 3.84% and 3.46% respectively.
Materials stocks extended their previous session losses as metal prices continued their trend downwards on the back of crumbling Turkish Lira as investors abandoned riskier assets on worries that the ongoing economic crisis in Turkey might have a ripple effect on Emerging markets and European banks that have a large exposure to the Turkish Lira. Several mining companies stocks were sent tumbling at the open, dragging the broader Materials sector lower by 1.04%.
Financial stocks also shed 1.02% as big banks extend their fall mirroring European banks. Treasury bond yields edged up slightly across the board as investors keep a close watch on the Turkey’s currency crisis and how it might impact Emerging markets and European banks with large exposure to the crumbling currency with a potential of spilling down on the U.S. markets.
Industrials and Consumer Discretionary were the other notable decliners in today’s session, down 0.52% and 0.51%. The broader Telecommunications and Technology sectors also shed 0.19% and 0.15% respectively in today’s broad based sell-off. Defensive Utilities and Health Care sectors were the only gainers in today’s risk-off mood, closing the session with slight gains of 0.09% and 0.01% respectively. Nielsen Holdings PLC was the top gainer in the index, soaring 12.06% on news of a potential sell-off.