Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 10/16” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
Opening the session on a weaker note, following the worst week since March on fears of rising interest rates, the S&P 500 index oscillated between gains and losses as Technology weakness overshadowed gains in defensive sectors. Today’s choppy price action was based on a relatively low volume following a turbulent week that caused a steep 4.10% loss and erased 4 months’ worth of gains.
Breaking below the key technical support level of 200 DMA, after regaining this level in Friday’s session, the index pulled back sharply in the last hour of the session to close near session lows at 2750.79, down 16.34 points and losing 0.59% over previous session’s close. Seven out of the eleven primary sectors ended the session in losses, with Technology and Energy sectors leading the declines.
THE DETAILS (The “How & Why”):
Technology sector was the weakest performer of the session, down 1.64% led by a sharp 4.53% decline in NVIDIA Corp. and a 4.36% decline in Adobe Corp. The index’s largest component, Apple Inc. shed 2.14% after Goldman Sachs warned of the iPhone maker’s falling earnings, citing rapidly slowing consumer demand in China. Chip stocks also remain under pressure due to the unresolved trade tensions between the U.S. and China.
Netflix Inc. fell 1.89% ahead of reporting its quarterly earnings after Goldman Sachs reduced its price target from $470 to $430, dragging the broader Consumer Discretionary sector lower by 0.47%. Amazon.com Inc. also traded lower by 1.55%, further weighing down on the sector.
Tension between the U.S. and Saudi Arabia over the disappearance of a prominent Saudi journalist, boosted the oil prices higher in today’ session. Energy sector, however, shed 0.82% led by a sharp decline in Occidental Petroleum Corporation. The oil and natural gas production company plunged 6.13% on news that it will not extend its contract with Qatar Petroleum.
Treasury yields inched up as stock markets attempted to stabilize from last week’s carnage. The 10-year Treasury yield settled at 3.160%, up 2.3 basis points. Financials sector gave up 0.51% as investors continue to digest quarterly earnings of big banks looking for clues of slowly deteriorating loan growth due to rising interest rates. Bank of America Corp. fell 1.90%, despite beating third quarter earnings estimates.
Health Care, Materials and Communication Services sectors were the other underperformers of the session, down 0.77%, 0.48% and 0.43%, respectively. On the other hand, defensive sectors partially offset some of the day’s losses. Consumer Staples, Real Estate and Utilities gained 0.60%, 0.51% and 0.35% respectively.
Industrials sector got a modest lift of 0.22% on prospects of consolidation within the defense industry. L3 Technologies Inc. and Harris Corp. were the top gainers of the session, soaring 12.84% and 11.87% after announcing an all-stock merger deal to become the sixth largest defense company in the U.S.