Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Tuesday, 10/30” will be posted around 8:30am EDT, Tuesday.
THE GIST (“THE WHAT”)
Another wild session, following an extreme volatile last week took the S&P 500 index closer to a correction territory for the second time in 2018. Rebounding solidly at the open on news of IBM’s acquisition of Red Hat Inc., the index took a bearish reversal following reports that the Trump administration plans to levy tariffs on remaining Chinese imports worth $257 billion as early as December. Declining oil prices further deepened the day’s steep losses.
Whipsawing within a wide range, Technology weakness dragged the index lower to give up early session’s sharp gains on registering the day’s high at 2706.85, falling to the day’s low at 2603.54. The final minutes of the session, however, saw a spike up to erase some of the losses to close the session at 2641.25, down 17.44 points and losing 0.66% over previous session’s close. Energy and Technology stocks outweighed the modest gains in defensive sectors.
THE DETAILS (The “How & Why”):
Concerns of falling global demand continues to weigh on oil prices. Extending their slide, oil prices fell after Russian Energy Minister Alexander Novak announced that Russia will not cut its oil production levels, citing that the global oil markets could face a deficit. Energy sector was the worst performer of the session, losing 1.88% alongside a fall in oil prices.
Intense selling within the Technology and Consumer Discretionary sector continued on concerns of a gloomier outlook in the wake of ongoing trade tensions between the U.S. and China. Red Hat Inc. soared 45.38%, helping lift optimism within the sector at the open after IBM announced its plan to acquire the open-source software company for $34 billion, making IBM the world’s biggest hybrid cloud provider.
Gains, however, faded in the afternoon session following reports that the United Kingdom plans to tax revenues of major technology companies, including Facebook Inc., Alphabet Inc. and Amazon Inc. Technology sector was broadly sold-off in the afternoon session, ending the session losing 1.81%.
Take-Two Interactive Software Inc. and NVIDIA Corp. were the worst decliners within the sector, down 6.95% and 6.39%. IBM shed 4.13% on concerns that it is overpaying for Red Hat Inc. FANG stocks remained under pressure throughout the session, led by a 6.33% loss in Amazon.com Inc. Alphabet Inc., Apple Inc. and Facebook Inc. fell 4.52%, 1.88% and 2.26% respectively. Besides Amazon, Netflix declined 5% to be among the worst performers within the Consumer Discretionary sector.
Reports that the Trump administration plans to levy fresh tariffs on all of the remaining Chinese imports worth $257 billion ignited sell-off in trade-sensitive stocks. Industrials, Communication Services and Materials sectors shed 1.68%, 1.61% and 0.28%, respectively. Boeing Co. was the worst decliner within the Industrials space, down 6.59%. The aerospace giant was further sold-off on news that its brand-new Boeing 737 plan, operated by Lion Sea crashed into the Java Sea off Indonesia.
Amid these sharp declines, defensive stocks outperformed. Real Estate, Utilities and Consumer Staples were up 1.56%, 1.35% and 1.07%. Retail, auto and auto parts makers were strong gainers of the session. General Motors Company and Ford Motor Co lifted auto and auto parts makers, rising 1.47% and 3.37% following news that China might reduce taxes on vehicle sales by 50%. Financials and Health Care sectors were the other modest gainers of today’s choppy session, up 0.86% and 0.18% respec
tively.
tively.