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
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THE GIST (“THE WHAT”)
Weekend reports of a series of drone attacks on the world’s largest oil-processing facility in Saudi Arabia sent oil prices skyrocketing, stoking fears that a massive disruption in oil supply could hurt global economic growth. The attacks knocked out half of the country’s daily crude production and more than 5% of the global oil supply. Weaker-than-expected industrial data out of China further dampened sentiment.
Opening lower, the S&P 500 index chopped within a narrow range to close off of session lows at 2997.96, down 9.43 points and losing 0.31% over previous session’s close. The index displayed resilience in the wake of intensifying geopolitical tensions in the Middle East as investors await a key interest rate policy decision following a 2-day FOMC meeting on Wednesday. Materials and Consumer Discretionary led the index lower, while a strong rally in Energy stocks kept the losses contained.
THE DETAILS (The “How & Why”):
Oil prices skyrocketed more than 14% following reports of devastating attacks on Saudi Arabia’s key oil production facilities. Prices, however, retreated slightly after President Trump authorized the release of Strategic Petroleum Reserve to keep the market well supplied.
Treasury yields pulled back after a solid week-long rally. Demand for traditional safe haven assets surged on concerns that a massive disruption in oil supply could pressurize global economy that has been struggling with slumping manufacturing activity. The 10-year Treasury yield fell the most in three weeks, settling 5.8 basis points lower at 1.843%.
Further dampening sentiment, China reported a smallest increase in industrial production in almost 17 years. Eight out of the eleven primary sectors traded lower, with Materials posting the biggest percentage decline of 1.63%. Consumer Discretionary traded 1.31% lower amid concerns that a spike in oil prices could negatively impact consumers’ purchasing power.
Airlines, transportations and cruise companies were badly hit alongside soaring oil prices. General Motors fueled losses within the Consumer Discretionary space, falling 4.25% after the UAW union went on strike with a month long negotiation between the auto giant and UAW stalled. Communication Services, Financials, Consumer Staples all posted modest losses.
A strong rally in Energy stocks alongside skyrocketing oil prices helped limit day’s losses. The sector closed sharply higher by 3.29%. Apache Corp., Helmerich & Payne Inc. and Devon Energy Corp. were the best performers on today’s choppy session, soaring 16.89%, 14.33% and 12.17%, respectively. Cimarex Energy Co., Marathon Oil Corp., Hess Corp. and Halliburton Co. were the other major gainers, all climbing more than 10% apiece. Real Estate stocks also held firm alongside slumping Treasury yields, closing higher by 1.02%.