Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 10/23” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
Mirroring a sharp recovery in China’s stock market, the S&P 500 index opened the busiest week of the third-quarter earnings season on a positive note. In an attempt to reassure investors, China’s government and central bank pledged to support the economy after official data showed that its third-quarter GDP grew at a lower-than-expected rate of 6.5%, sending the Chinese equities rallying in its best day since March 2016. Unable to hold on to these early session gains, the index took a sharp leg lower following disappointing earnings, breaching the critical support level of 200 DMA (now at 2768.30).
While the index attempted to stabilize, bouncing off the day’s low registered at 2749.22, gains soon faded amid ongoing concerns of rising yields and slowing global economy. Sliding for the fourth session in a row, the index closed the choppy session near day’s lows at 2755.88, down 11.90 points and losing 0.43% over previous session’s close. Eight out of the eleven primary sectors ended the session lower, with Technology and Consumer Discretionary to be the only sectors sporting decent gains.
THE DETAILS (The “How & Why”):
Financials was the biggest drag on the index, falling broadly by 2.06%, led by big banks on concerns of slowing loan growth rate in a rising interest rate environment. Synchrony Financials slumped 6.03% to be the worst decliner within the sector. Huntington Bancshares Incorporated, Fifth Third Bancorp and Regions Financial Corporation were the other notable decliners, down 3.80%, 3.61% and 3.02% respectively, ahead of their earnings release.
Crude oil prices settled relatively unchanged amid ongoing tensions between the U.S. and Saudi Arabia over the killing of a prominent Saudi Journalist Jamal Khashoggi. Energy sector shed 1.10%, led by a 4.20% decline in EQT Corporation. Defensive sectors were other notable decliners in today’s session, erasing some of their last week’s solid gains. Real Estate, Health Care, Consumer Staples and Utilities were all down 1.41%, 0.81%, 0.77% and 0.68% respectively.
Nektar Therapeutics was the worst decliner of the session, tumbling 17.22%, leading the broader Health Care sector lower. Bristol-Myers Squibb Co further dragged the sector down, falling sharply by 6.30% after the FDA delayed its approval for a new cancer drug.
Materials and Industrials sectors also gave up 0.92% and 0.37% in today’s sell-off on the back of a strengthening dollar. Limiting losses within the Industrials space, Jacobs Engineering Group Inc. was the top gainer of the session, soaring 6.82% on announcing sale of its energy, chemicals and resources business to an Australia based WorleyParson Ltd. for $3.3 billion.
On the other hand, Technology and Consumer Discretionary were the only sectors to close the session with gains, up 0.81% and 0.48% respectively, led by strong gains in tech giants and retail stocks. Apple Inc., Advanced Micro Devices Inc., Amazon.com, Alphabet Inc. and Microsoft Corp. gained modestly ahead of their earnings release this week. Ralph Lauren Corp. was the top gainer within the Consumer Discretionary space on announcing a collaboration with a London based Palace to launch its first streetwear collection.