Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 09/25” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
Weighed down by trade and political news headlines, the S&P 500 index opened the week on a weaker note. U.S. tariffs on $200 billion worth of Chinese goods went into effect today. China retaliated by applying tariffs on $60 billion worth of American goods and cancelled trade talks with the U.S. officials until the Trump administration stops threatening it with tariffs. Separately, news that Deputy Attorney General Rod Rosenstein is expected to resign from his post also dampened investor sentiment at the open.
Registering the day’s low at 2912.63, the index pared some of the losses as investors digested trade and political risks. Oil rallied to a four-year high to provide support to the index. Trading in a narrow range, the index closed the session off session lows at 2919.37 (Under 2 points below the level indicated by our intraday models to go short off of! Click here to read the full text), down 10.30 points and losing 0.35% over previous session’s close. Seven out of the eleven primary sectors ended the session lower, with Energy and Technology sectors offsetting strong decline in defensive sectors.
THE DETAILS (The “How & Why”):
Defensive sectors were the worst decliners in today’s session, falling sharply as Treasury yields edged higher after the European Central Bank’s President Mario Draghi hinted at a pick-up in inflation. The 10-year Treasury bond yield settled slightly higher at 3.086%. Investors will be keenly looking forward to the Federal Reserve’s policy meeting this week, expecting another rate hike this year.
Real Estate, Consumer Staples and Utilities sectors shed 1.89%, 1.50% and 0.88% respectively. Except Scana Corporation and Estee Lauder Companies Inc., all of the components within these three sectors ended the session with losses. Digital Realty Trust Inc. was among the worst performer within the Real Estate space, down 4.13% on announcing its plan to buy a Brazil-based data center provider Ascenty.
With trade jitters back to the fore, trade-sensitive Materials and Industrials also fell sharply by 1.41% and 1.32%. Airline stocks faced the brunt of rising oil prices. Alaska Air Group Inc., American Airlines Group Inc. and Delta Air Lines Inc. declined 3.98%, 3.72% and 3.69%, respectively weighing down on the broader Industrials sector. General Electric Co. tumbled to a 9-year low following stock downgrades by several analysts, citing its struggling power business.
Among the other notable decliners were Financials and Consumer Discretionary sectors, down 1.06% and 0.57%. Michael Kors Holdings Ltd. was the worst performer in today’s session, tumbling 8.23% on rumors that the handbag maker could buy an Italian fashion house Versace for $2 billion. Comcast Corp. also dragged the sector lower, falling 5.99% after stock downgrade by an analyst at MoffettNathanson, citing that the company’s winning bid to acquire the British television company Sky PLC was overvalued.
On the other hand, the broader Energy sector supported the day’s gains, up 1.47% on the back of rising oil prices. Oil prices spiked after the keenly watched OPEC and other major oil producers meeting this weekend to address an expected supply shortage, concluded without any decision to raise the output. Technology, Telecommunications and Health Care sectors closed the session higher by 0.31%, 0.21% and 0.16% respectively.