Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 10/09” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
Weighed down by Technology weakness, the S&P 500 index extended its slide for the third straight day amid fears of rising Treasury yields. With Treasury markets being closed for trading in observance of Columbus Day, defensive stocks gained some of the lost ground to provide much needed support amid tumbling Tech stocks.
Opening lower mirroring the overnight futures market, the index attempted to reverse trend in the early session, but was pulled back on registering the day’s high at 2889.45 as Technology weakness weighed down on the broader index. However, managing to hold on to the key support level of January 2018 highs, the index closed a choppy session flat at 2884.43, down only 1.14 point and losing 0.04% over previous session’s close.
THE DETAILS (The “How & Why”):
Technology sector extended its slide for the third straight session, down 1.18% as investors continue to abandon riskier assets in the rising-yield environment. Chip stocks remain under pressure on the back of several analysts’ downgrades of the industry. Salesforce.com Inc., Autodesk Inc. and Cadence Design Systems Inc. were the worst decliners within the sector, losing 4.14%, 3.81% and 3.47% respectively. Communication Services sector added to the decline, falling 0.15%.
Waters Corp., Intuitive Surgical Inc. and Abiomed Inc. dragged the broader Health Care sector lower by 0.17%, losing 4.07%, 4.05% and 4.02%. Energy and Materials were the other slight decliners of the session, down 0.05% and 0.01% respectively. Dollar strengthened on the back of rising interest rates, weighing down on metals and commodities. Oil prices also settled slightly lower on reports that the Trump administration might grant waivers to some countries importing oil from Iran after the Iranian sanctions come into effect in November.
Offsetting the Tech-weakness were defensive sectors that reversed some of their last week’s sharp losses due to rising Treasury yields following strong Jobs report suggesting a slowly creeping up inflation that could trigger an aggressive response from the Federal Reserve. Real Estate, Consumer Staples and Utilities sectors outperformed by 1.32%, 1.34% and 0.77% respectively.
Financial stocks were the other modest gainers of the session, up 0.58%. Investors will be looking forward to the third-quarter earnings release by big banks later this week. Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. kick start the quarterly earnings season this week.